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If answered would provide clarity, openness and transparency. For that reason, I realize the chance anybody will ask these questions is small, and that they would be answered even smaller. A powerful cartel causes most farmers, smaller merchants and brewers to self-censor any criticism of the establishment for fear of retribution.

Here you go:

1) With great market power comes responsibility. How do you balance profitability with the ethical obligation to maintain a fair and competitive marketplace?

2) For the people who own or represent the Hop Breeding Company: Have you ever met to discuss acreage management for the varieties whose patents you jointly own?

3) Given the close-knit nature of the hop industry, what safeguards do you have in place to prevent the sharing of sensitive market data that could facilitate coordinated behavior?

4) For the Yakima Chief Hops™ representative: Have your acreage reduction efforts reduced the production of farmers who own HBC, YCH, YCR to a lesser extent than those outside of those groups?

I WANT TO LEARN MORE

5) For the owners of every proprietary variety: Once your 20-year patent-enforced monopoly expires, do you intend to allow the variety to enter the public domain as required in the U.S. Constitution and by the U.S. Patent and Trademark Office[1][2]?

6) For the Yakima Chief Hops™ or John I. Haas representatives: In 2018 Louis Gimbel warned from the merchant panel at the HGA convention that a market surplus existed[3]. Given that acreage for the proprietary varieties owned by HBC that your companies market did not decrease until 2022, can you identify when the oversupply situation became apparent for you and what brought it to your attention?

7) For proprietary variety owners: How do you respond to the farmer criticism that you broke a deal you had with them to properly manage the supply of your proprietary varieties and maintain profitable pricing in exchange for them reducing themselves to contract growers?

8) The companies on the panel represent a significant majority of the global market. How do you respond to concerns that your dominance stifles competition and limits opportunities for smaller players to thrive?

"Learn from yesterday, live for today, hope for tomorrow. The important thing is to not stop questioning."[4]

- Albert Einstein

I would not expect clear or valuable answers to these questions from a panel of merchants in a public forum. The people in such positions are very smart and excellent public speakers. They can maneuver around difficult questions and weave together a beautiful answer while providing very little useful information while making you feel good that they answered your question.

One more thing: For the people whose future in the industry is uncertain because forced acreage cuts of proprietary varieties reduce their efficiency, remember this … you probably don’t have as much to lose as you think. If the status quo continues, you won’t attend many more hop conventions.

Good Luck!

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[1] https://www.goldsteinpatentlaw.com/what-happens-when-patent-expires/

[2] https://www.uspto.gov/sites/default/files/documents/patent_basics.pdf

[3] https://brewingindustryguide.com/rightsizing-the-hop-market/

[4] https://www.alberteinsteinsite.com/quotes/einsteinquotes.html

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PROFIT & LOSS

The data show the profitable years for the U.S. hop industry since 2012 were 2008 and 2009. The reason for that is the cost of production survey the industry publishes. In my October 2022 article entitled, “How much do U.S. Hops Really Cost?” I explain how the industry changed the Washington State University (WSU) Cost of Production Survey in response to canceled brewers’ contracts in 2009. While brewers did cancel their contracts en masse in 2009, the hop industry never returned to the pre-2010 method for calculating the cost of hop production. Craft brewers paid the price.

The doubling of acreage between 2012 and 2021 suggests American farmers had some financial incentive to produce hops. If we are to believe the cost of production data, between 2012 and 2024 the U.S. industry had one profitable year in which the entire industry made a profit of $8.65 million. The industry claims, however, to have lost $1.44 BILLION since 2012 (Table 22). Something is not right. Maintaining these claims and not returning to a more accurate method for reporting the cost of production demonstrates arrogance and a blatant contempt for brewers.

Table 22. U.S. Hop Industry Profit & Loss (P&L) Analysis

I mention this because if the industry continues to publish the survey every five years, WSU will publish a new survey this year. So, now is the time brewers could ask questions about how it is calculated. The survey wasn’t always the way it is today. Massive changes in the way the cost of production was calculated happened in 2010[1]. The 2010 report explains the methods they used to generate inflated prices. Nobody read the fine print. You can download it for free here if you’re interested.

If the industry continues to follow the pattern since 2010, they will need to claim the cost of production per acre has increased to over $19,000 per acre in 2025. I believe this is the year the survey breaks down. Decreasing the cost of production is unthinkable in the current economy. That would expose the manipulation from the previous 15 years and brewers would lose trust in the industry. Increasing the reported cost of production while farmers continue to produce at lower prices would create a dichotomy that cannot be explained. Reported losses more ridiculous than the $1.44 billion dollars “lost” since 2012 would seem disingenuous. I think the industry may have backed itself into a corner with the WSU survey. I suspect the cost of production survey, which has existed for decades will be discontinued. If it continues, I look forward to reading the results.

Most craft brewers with whom I have spoken over the years want to support the farmers from whom they purchase their hops. It is common for industry supported studies to produce bias results favorable to the sponsoring industry[2][3]. Data used to calculate costs should not come from the people with a financial interest in the results. In the case of the cost of hop production survey, a higher cost number anchors price negotiations at a higher level. Hop farmers are smart. They know this.

The period between 2000 and 2004 was considered by hop farmers to be one of the most difficult in history. According to industry data, those look like good times. It’s a miracle any farmers survived the massive losses brought by the high prices paid during the craft boom years (Figure 11).

Figure 11. U.S. Hop Industry Annual Profit & Loss (P&L)

Source: USDA NASS, WSU Cost of Production Survey data

THE SURPLUS RESPONSE

We have seen the Delayed Surplus Response (DSR) play out in real time over the past five years. The DSR, as the name suggests, is responsible for surplus production continuing beyond the point when a known surplus exists. This prolongs and exaggerates the surplus and creates more dire consequences during the correction period. The DSR occurs for several reasons.

1. GREED: Long-term contracts lock in brewers to a supplier and limit their options when demand changes. The forced fulfillment of unnecessary contracts at premium prices during a surplus extends sub-optimal farmer pricing. While they appear to transfer the burden of oversupply to the brewery, they prolong the most painful part of the hop cycle (i.e., the surplus) for short-term gain.

2. EMOTION: The largest hop merchant companies have hop farms or are owned by farmers. Farmers often hope that next year will be better when there is a problem. Many are slow to realize when they are deep in a crisis that won’t be resolved in a year. No farmer wants to decrease their farm efficiency by producing below capacity. Ego combined with concern about legacy and gossip make them subject to several cognitive biases[4].

3. TRADITION: Nobody in the hop industry knows the demand for hops. This could be solved, but doing so would disrupt the current narrative. Merchant/farmers have convinced brewers that an inefficient contracting system is the only way to know demand and secure hops for the future. The real purpose of the contract, however, is to secure financing for production. Aiming at the wrong target has led to a lot of missed shots. The current antiquated contract system is not an accurate forecaster of demand.

YOU ARE HERE!

In my February 2023 article entitled “The Truth Behind the Hop Surplus” I introduced a graph that demonstrated the hop cycle in linear terms (Figure 12). In 2023, production decreased, but annual production was still adding to the cumulative surplus.

Figure 12. Estimated location in the hop cycle in 2022.

Almost two years later, the situation has changed in several important ways. Declining beer production, brewer owned surplus hops and failing breweries create a decreasing demand for hops (Figure 13). Deeper cuts will be required to bring the industry within the target zone where a potential crop failure can interrupt the consistency of supply for a major brewery somewhere on the planet. The goal is not balance. It is to maintain consistency of supply while also maintaining the threat of an interruption. That is the sweet spot.

During the past two years, the American hop industry stopped adding to their surplus. As a result, the red dot marking the current location has moved further to the right than it was in February 2023, but not by much.

Figure 13. Estimated location in the hop cycle in 2025.

Source: The MacKinnon Report

The next cuts will determine the rate at which that red dot continues to move to the right (i.e., how quickly the industry reduces the surplus). Previous efforts in the U.S. will yield their first results in 2025 in the form of stock decreases. That should provide some optimism in the March and September stock reports. If there is no sign of relief in those reports it will mean that demand has fallen much further than anticipated.

Europe is in a very difficult inventory situation due to the global decline in beer production. Data is not as available as in the U.S. Sources have shared with me that inventories of noble European varieties have built up in warehouses. The brewers to which these hops belong intend to use them, but working through them will take time. In the meantime, this creates reduced demand for several key European varieties between now and 2029. If acreage is not removed from production in 2025, Europeans will be taking a page from the American DSR playbook by adding to and prolonging their surplus. The problem for European farmers to idle or remove acreage is that they need two or three years to reach harvest once the hops are necessary again. This makes it a difficult and expensive proposition.

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If you’ve made it this far, I assume you’re finding this article useful … or at least entertaining. The number of subscribers has skyrocketed over the past 6 months. I would like to thank those of you who read and share my articles. That is the biggest compliment you could give, and I appreciate that you do that. I would like to ask you to do that now if you know somebody who might enjoy reading nerdy articles about hoponomics.

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If you’re a brewer there’s another way you can support my writing and take advantage of the things I’ve learned over the past 25 years. I’m offering my hoponomics expertise to help a limited number of breweries learn how to hack their hop buying tactics. If you want to learn more about how that works, click the link below. I hope to hear from you!

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HOP STOCKS

The stocks data reported by the USDA lack context. Data without context is difficult to interpret. Separating out to whom the inventory is assigned begins to tell a story. There was a clear inflection point with regards to inventory in 2014 (Figure 14). For a decade the problem has been building.

Figure 14. September 1 Hop Stocks Separated by Brewer and Merchant/Farmer

Source: USDA Hop Stocks Reports 2000-2024

For a deeper analysis of the September 1 Hop Stocks report, please read my September 2024 article entitled, “Trends Uncovered in the Hop Stocks Report”.

Looking back at the past 25 years of September 1 hop stocks relative to U.S. production represents the hop cycle in a linear form. Surges in production result in surges in inventory that take years to correct. In 2025, it is clear the industry is oversupplied and that it will be some time before some sort of equilibrium is reached again (Figure 15).

Figure 15. Hop Stocks vs. Production from same year 2000-2024

SOURCE: USDA NASS

DEPLETION

It is reasonable to assume nobody incurs the expense of shipping without good reason. Hop movement out of storage (i.e., depletion) is, therefore, a signal of real or anticipated demand. That makes it valuable data. Depletion without meaningful context, however, is still not very useful (Figure 16).

Figure 16. U.S. Annual hop stocks depletion 2014-2024[5]

Source: USDA Hop Stocks Reports 2014-2024

Depletion is a lagging indicator[6]. Since production and acreage do not often fluctuate so fast from one year to the next, it can be used to forecast. With the proper context, we can interpret meaning from the depletion figure. Between 2012 and 2021, as the size of the market and the crop increased, depletion increased … as you would expect[7]. Measuring the annual depletion between September year n-1 and year n as a percentage of total available inventory (i.e., September stocks year n-1 + crop year n-1) reveals surpluses and deficits (Figure 17).

Figure 17. Depletion % relative to total hops available 2000-2024

SOURCE: USDA NASS

Other things can create misleading data spikes. For example, when Yakima Chief Hops™ built their storage facility in Belgium in 2021, which according to their website holds 8,800 pallets of hops, it is reasonable to assume they filled it with hops they anticipated would be delivered within the region[8].

Another example of a spike are the stricter pesticide regulations in the EU. The affected hops are salvageable since the rest of the world has not implemented a similar ban, but they had to be replaced with similar product. The offending product had to be moved out of the EU. If you’d like to read more about that situation, please see my March 2024 article entitled, “Pesticides, Hop Stocks and Germany’s Growing Problem”.

FUN FACT: Sometimes hops seem to disappear. Perhaps that’s why Hop Growers of America refers to depletion as “disappearance”. When I started working as director of Hop Growers of America, the board of directors told me about “the balancing item”. It was a catch-all line item used to account for the discrepancy between hops produced and hops available during the days of the third Federal Marketing Order. With multiple years of aging inventory in different forms in warehouses belonging to merchants that refuse to cooperate, it seems tracking inventory was difficult. More on the possible source of the balancing item discrepancy below.

WHOSE HOPS?

This hop surplus is complicated. It is more contracted than previous cycles and the decline in global beer production complicates the situation. Breweries that have not worked through their personal surplus don’t want to sell them at a loss because market prices are much lower today. Instead, the hops wait to be used, or the brewer hopes to sell them.

On January 20, 2025, the following inventories were available on Lupulin Exchange[9]:

Crop years 2017 and 2018: 5,874 pounds (2,665 kg.)

Crop year 2019: 32,491 pounds (14.7 mt.)

Crop year 2020: 111,461 pounds (50.5 mt.)

Crop year 2021: 127,094 pounds (57.6 mt.)

Crop year 2022: 210,070 pounds (95.2 mt.)

Crop year 2023: 147,447 pounds (66.9 mt.)

Crop year 2024: 76,399 pounds (34.6 mt.)

That’s over 700,000 pounds (318 mt) of hops! The Lupulin Exchange is one outlet for the resale of aging inventory. According to the US Hop Source web site, they have access to 4.85 million pounds (2200 mt) of hops available for sale. If that number is correct, I suspect some of the hops listed on the Lupulin Exchange are also available through U.S. Hop Source.

Although these stocks are contracted and sitting in warehouses ready to ship, most breweries have not paid for them. I mention this to highlight a gray area. Merchants and farmers refer to these as “the brewers’ hops”. Bankers like that. It sounds like the deal is already done and the money is on its way. I learned over the years that until the money is in the bank those hops are not sold.

Whose hops are they? On paper, they belong to the brewer. Brewers don’t always agree[10]. The merchant, however, pays to insure those hops because they’re in his warehouse. If that warehouse burns down, the merchant replaces the hops[11]. Quite a few bank employees read these articles. If you work at a bank and you’d like to know the questions to ask about aging hop inventory, feel free to contact me. You can reach me through my website or on LinkedIn.

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TRADE BALANCE

Over the years, I discovered there are problems with the way the U.S. hop industry reports export-import information. This will be a good topic for a separate article as it requires a deeper dive than I am prepared to do as part of this article. It’s important though because it deals with transparency. There is a point at which information too will become proprietary.

CONCLUSION

For the 25 years I’ve been working with hops, every year merchants and farmers have said, “it’s going to be an interesting year”. I’m sure there are plenty of people saying that this week in San Diego. There is never a dull moment in the hop industry. The next several years will be more significant than any other similar period in hop history. If the popularity of public varieties continues to decrease, it will mark the end of an era. If you’re a brewer, you might not think that matters much so long as you can get the three or four proprietary varieties you want from your favorite merchant. This sort of situation is new to the hop industry, but it has happened plenty of times in other industries. The result of high market concentration is higher prices, less selection and more onerous terms and conditions of sale.

I don’t think most brewers care what they will lose. They’re concerned more about getting the popular hops they want when they need them. I think that’s more because they’re busy and going in too many directions. They don’t have time to worry about a hop cartel they may not understand. There aren’t enough hours in the day for that. By the time they figure out what they have traded away, it will be too late to get it back. I’ve referred to the story of Dr. Faustus in two previous articles where I discuss this in greater detail. If you don’t know the origin of the term “Faustian bargain”, I’ll include a fun video summary of the story at the end of this article.

For those who care and want to try to make a difference in your own way, let’s explore how we can work together. Click the link below to find out more.

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FORECAST

Farmers in 2025 want to produce any varieties needed to avoid acreage reduction. That combined with the surplus means it is a buyer’s market for hops new and old. There will be opportunities between now and April for breweries who know how to exploit them. Other opportunities to secure low prices will come along later, in the summer months. The overall expectation, however, is for lower pricing in 2025. There is no chance of a shortage on the horizon.

Acreage should decline in the EU and in the U.S. If farmers don’t reduce acreage, 2026 and 2027 may also be very “interesting”.

I expect the market to continue to be segmented with fresh proprietary varieties commanding a premium price due to their limited access. The coming year represents an opportunity for brewers to evaluate the value of proprietary varieties relative to their premium price. They might want to weigh if they are OK with a more monopolistic hop industry in which each vendor is selling their own brand. In that world, you’ll look far and wide to find a bargain, prices will all be high due to tacit collusion. Those are the consequences of increased market concentration. The path to high market concentration is increasing proprietary variety popularity. Brewers should look for ways to minimize their reliance on and exposure to proprietary varieties while still reaping the benefits from them. There are some creative ways to do that.

[1] 2010 WSU Cost of Hop Production Survey available at: https://pubs.extension.wsu.edu/2010-estimated-cost-of-producing-hops-in-the-yakima-valley-washington-state

[2] https://jamanetwork.com/journals/jama/fullarticle/196846

[3] https://pmc.ncbi.nlm.nih.gov/articles/PMC6187765/

[4] https://www.verywellmind.com/cognitive-biases-distort-thinking-2794763

[5] If you’ve been reading these articles for a while, this graph may look familiar. I used it back in September 2024. Since then, there have been nearly 100 new subscribers, so I include it for their benefit and to refresh everybody’s memory.

[6] https://www.investopedia.com/terms/l/laggingindicator.asp

[7] For the past several years, Hop Growers of America refers to the amount of inventory drawn down over the course of the year, as revealed by the USDA Hop Stocks reports, as “disappearance”. I prefer “depletion” since it sounds like an intentional act.

[8] https://www.yakimachief.com/commercial/press-room/european-fulfillment-center-belgium

[9] It is interesting to note that you must now login to see pricing on the lupulin exchange.

[10] Smaller brewers might even abandon a contract with a smaller merchant because they feel the risk is worth the reward. I am speaking about my firsthand experiences with brewers who did exactly that and moved on to purchase the same hops from another supplier at a lower price.

[11] There are exceptions of course, for example if the brewery has paid for the hops and they are just using the storage space available with the merchant. In that case, it would be normal for the brewery to ensure their hops since they have a financial liability if they are destroyed.

[12] I have cut several sections I planned to write about to keep this article shorter (I know that probably sounds like a joke). I’ll return to the topics I skipped in future articles.

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EXECUTIVE SUMMARY

The industry is undergoing what will be the largest contraction of acreage and concentration of power in history. At the time of this writing, there no noticeable effect of the previous three years of acreage reduction on the market. Prices continue to decline while stocks continue to rise. That will change in 2025, but it will be years before the desired effects from the acreage correction takes hold. Contracts forced upon brewers are wonderful for the recurring revenue they provide merchants and farmers. They would be the perfect instrument if they were a real indicator of demand as claimed, and if it could be decoupled from greed. Contracts represent a brewer’s best guess at future sales. The longer the contract, the less accurate the guesses. During the past cycle, as always happens, breweries were told they must contract for volumes for five years or they cannot be guaranteed the hops they need. I remember telling brewers this myself when I was a dealer because that is what I had to do to get the hops from the farmer. In my December 2024 article entitled “2025 Hop Industry Changes”, I discussed the anatomy of a hop cycle.

What I did not mention is that this is the point in the market cycle when brewers are angry. They’re upset at hop merchants for locking them into long-term prices for hops they do not need a prices much higher than they could get on the spot market. This hasn’t happened since 2009 due to the unusual length of the boom market that recently ended, but it happens every time. The feeling many brewers have now … that they were exploited … is justified. They were. It is also what keeps the cycle going. If the past is any indicator, the next few years will bring the brewer’s revenge, the next step in the tit-for-tat cycle. Proprietary varieties have the potential to shorten this part of the cycle if managed correctly. The depth of acreage reductions being discussed this week and next will determine how many more years the industry will suffer before balance is restored.

This report documents recent industry changes and provides valuable commentary and perspective. I hope you find it useful. If you do, please consider sharing it with a friend who may also get some value from it. If merchant/farmers are interested in transparency as many of them claim, they will be happy for this information to spread far and wide through the brewing industry.

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SOMETHING NEW

Before we get into the details of this report, I would like to share something I’ve decided to do. From my 20+ years in the industry, I’ve learned how brewers buy their hops and the opportunities they miss to get better pricing when they do. I am confident almost every brewery can save 10% on their hop bill. Many can save a lot more. I want to help them do that so I’m making myself available to a limited group of breweries. Click on the add below to learn more. Space is limited so don’t wait.

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U.S. HOP ACREAGE (in the Pacific Northwest)

TABLE 1. U.S. PROPRIETARY HOP ACREAGE 2020-2024

SOURCE: USDA National Hop Report 2020-2024

NOTE: The USDA reporting requirements affect how the numbers are reported. If three unique farms do not produce a variety, it is not listed separately in a USDA report. For that reason, a variety like Pekko ®, ADHA-871 appears to have disappeared from the reporting in 2024. That does not mean Pekko ®, ADHA-871 acreage decreased to zero in 2024. Pekko ®, ADHA-871 acreage was added to the “other” hops reported total, which acts as a catch-all for all such varieties (Table 3).

COMMENTARY:

You can read the numbers for yourself. What is interesting is to notice as you do is HOW the numbers are changing. Public varieties are decreasing at a more rapid pace than proprietary varieties. It’s almost as if there is a coordinated effort behind the scenes to make this happen. As is the case in this New York Post article about a potato cartel, all those involved would certainly claim no wrongdoing and that the market was responsible any activity that appeared coordinated.

Brewers are demanding proprietary varieties, that’s true. Merchant promotional efforts are disproportionately aimed at selling their proprietary varieties rather than public varieties. They carry public varieties, of course. Proprietary varieties offer their owners millions in royalties and a competitive advantage for their merchant companies. Considering these incentives, it’s no surprise there are few posts on social media by the big companies for public varieties. Only the independent farmer has an interest in promoting public varieties.

Proprietary varieties enable their owners to limit supply. Had they listened to Louis Gimbel, CEO of S.S. Steiner in 2018 when he explained to Hop Growers of America convention attendees that there was already a hop surplus[1], things might be different today. Greed is a powerful motivator. It’s hard to say no to a brewer who insists he needs hops despite the ridiculous prices you’re quoting him. I’ve fallen for that in the past and I will help brewers not make the same mistake in the future.

TABLE 2. U.S. PUBLIC HOP ACREAGE 2020-2024

SOURCE: USDA National Hop Report 2020-2024

TABLE 3. U.S. OTHER & EXPERIMENTAL HOP ACREAGE 2020-2024

SOURCE: USDA National Hop Report 2020-2024

TABLE 4. TOTAL HOP ACREAGE 2020-2024

SOURCE: USDA National Hop Report 2020-2024

Figure 1. U.S. Pacific Northwest Hop Acreage 2012-2024

SOURCE: USDA NASS National Hop Reports 2012-2024

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U.S. HOP PRODUCTION (in the Pacific Northwest)

TABLE 5. U.S. PROPRIETARY HOP PRODUCTION 2020-2024 (1,000s)

SOURCE: USDA National Hop Report 2020-2024

TABLE 6. U.S. PUBLIC HOP PRODUCTION 2020-2024

SOURCE: USDA National Hop Report 2020-2024

TABLE 7. U.S. OTHER & EXPERIMENTAL HOP PRODUCTION 2020-2024

SOURCE: USDA National Hop Report 2020-2024

TABLE 8. TOTAL HOP PRODUCTION 2020-2024

SOURCE: USDA National Hop Report 2020-2024

Figure 2. Composition of U.S. Hop Production.

SOURCE: USDA National Hop Report 2012-2024

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U.S. HOP YIELD (Average by variety in the Pacific Northwest)

NOT ALL ACREAGE IS CREATED EQUAL

Boom years create inefficiencies. Farmers scrambling to increase acreage in response to rising prices leads to poor decision making. In the rush, hops are planted in fields with poor soil and in undesirable locations. With chemical fertilizers and pesticides and decades of experience, most farmers in the industry can grow hops even on the worst soil. Their yield is the issue. In poor soil or under undesirable growing conditions, hops are more expensive to produce, and the quality may be lower than normal. U.S. hop acreage doubled between 2012 and 2021[2]. During that time, proprietary variety production grew to triple its original size (Figure 3).

Figure 3. Increase in U.S. Proprietary Variety Production 2012-2021

SOURCE: USDA NASS National Hop Reports 2012-2021

During contractions, farmers remove their lowest yielding yards to improve farm efficiency. Inconvenient yards farther away from the picking facility or those that suffer from regular pest or disease infection (i.e., higher pesticide costs) are first to go. For that reason, assuming all other variables are equal, yields will continue to increase (Table 9). As lower yielding fields and varieties are removed, the cost of production per acre should decrease. That is never highlighted by hop industry groups. Their mission is to encourage increasing prices by creating the perception of value over cost.

TABLE 9. U.S. PROPRIETARY HOP YIELD 2020-2024 (1,000s)

SOURCE: USDA National Hop Report 2020-2024

TABLE 10. U.S. PUBLIC HOP YIELD 2020-2024

SOURCE: USDA National Hop Report 2020-2024

TABLE 11. U.S. OTHER & EXPERIMENTAL HOP YIELD 2020-2024

SOURCE: USDA National Hop Report 2020-2024

TABLE 12. TOTAL HOP YIELD 2020-2024

SOURCE: USDA National Hop Report 2020-2024

U.S. HOP VARIETY ACREAGE MARKET SHARE (in the Pacific Northwest)

TABLE 13. U.S. PROPRIETARY HOP ACREAGE MARKET SHARE 2020-2024

SOURCE: USDA National Hop Report 2020-2024

TABLE 14. U.S. PUBLIC HOP ACREAGE MARKET SHARE 2020-2024

SOURCE: USDA National Hop Report 2020-2024

TABLE 15. U.S. OTHER & EXPERIMENTAL ACREAGE MARKET SHARE 2020-2024

SOURCE: USDA National Hop Report 2020-2024

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MARKET SHARE OF 5 LARGEST PROPRIETARY VARIETY GROUPS 2020-2024[3]

Prior to the creation of proprietary varieties, it was never possible to know the market share of the different merchant companies. The figures below only represent the known proprietary variety acreage and production they control. It does not represent the public variety acreage they also sell. As such, these numbers represent the most conservative estimate of each company’s actual market share.

Changes in yield due to weather and other variables affect the market share figures in the graphs that accompany the following tables (Figure X, X, X, X, & X). They demonstrate the competitive nature of the proprietary game and that the two largest entities control

Table 16. Estimated 2024 Hop Breeding Company Production PNW Market Share %

SOURCE: 2024 USDA National Hop Report

Notes:

*Represents an estimate based on last known reported figures

† The HBC is a joint venture owned by John I. Haas and Yakima Chief Ranches … Yakima Chief Ranches is owned by the Smith, Carpenter and Perrault families. Members of these three families are also owners of Yakima Chief Hops™.

Figure 4. Five-Year Estimated Hop Breeding Company Proprietary Variety Production PNW Market Share %

SOURCE: USDA NASS National Hop Reports 2020-2024

Table 17. Estimated 2024 S.S. Steiner Proprietary Variety Production PNW Market Share %

SOURCE: 2024 USDA National Hop Report

Notes:

*Represents an estimate based on last known reported figures

Figure 5. Five-Year Estimated S.S. Steiner Proprietary Variety Production PNW Market Share %

SOURCE: USDA NASS National Hop Reports 2020-2024

Table 18. VGF Proprietary Variety Production PNW Market Share %

SOURCE: 2024 USDA National Hop Report

Figure 6. Five-Year VGF PNW Proprietary Variety Production Market Share %

SOURCE: USDA NASS National Hop Reports 2020-2024

Table 19. OSU Proprietary Variety Production PNW Market Share %

SOURCE: 2024 USDA National Hop Report

Figure 7. Five-Year OSU PNW Proprietary Variety Production Market Share %

SOURCE: USDA NASS National Hop Reports 2020-2024

Table 20. CLS Proprietary Variety Production PNW Market Share %

SOURCE: 2024 USDA National Hop Report

Figure 8. Five-Year CLS PNW Proprietary Variety Production Market Share %

SOURCE: USDA NASS National Hop Reports 2020-2024

SAVE BREWERIES $10 MILLION

While I have you hear, I want to share one of my goals with you for the help I plan to provide to breweries. My goal is to save breweries $10 million on their hop purchases. I don’t think that will happen in the first year with the first group. Honestly, I think it will probably happen by year three. That depends on the size of the breweries that sign up. So, brewers, if you’d like to help me reach that goal, sign up today.

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SAP RAW & ADJUSTED

Every year the USDA issues a Season Average Price (SAP) for the U.S. That number is a passive aggressive means for the industry to communicate the appropriateness (or inadequacy) of prices when compared with the cost of production the industry claims through the Washington State University Cost of Hop Production Survey. I detailed how the reported U.S. cost of production has been exaggerated by the hop industry since 2010 to the farmer’s advantage to make the brewing industry believe costs are much higher than they are. As they say, “The devil is in the details”.

They do this to anchor the idea of what hops should cost at a higher price level for negotiation purposes. If you’d like to read more about that, please see my October 15, 2022 article entitled “How Much Do U.S. Hops Really Cost?”. If you’re one of the hundreds of new subscribers to the MacKinnon Report in 2024, you may not have read that article. You should! It reveals the contempt members of the hop industry have had toward the brewing industry over the years. It explains how they inflate their reported costs. In the exciting conclusion to this State of the Hop Industry report, I’ll show how ridiculous those claims are. You won’t want to miss that! Using the information in that article, it is possible to calculate the real cost of production for hops. Industry groups will never do that. They don’t want, nor would they benefit from, such openness and transparency.

For additional perspective on prices, each year, it is valuable to take a longer-term view of U.S. season average prices. Converting them into current U.S. dollars offers more meaning than the raw data can convey (Table 21).

Table 21. U.S. Season Average Prices (SAP) Raw Data and Prices Adjusted for Inflation Using the Consumer Price Index to 2024 USD 1949-2024.

SOURCE: USDA NASS, Bureau of Labor Statistics

Raw unadjusted U.S. season average prices only show part of the picture. Relative to the previous year or two, they are relevant because we have lived through those times Figure X. It’s interesting, but it doesn’t tell the viewer much, only that this year’s price is higher or lower relative to last year.

Figure 9. Raw SAP

As is the case with most data, a broader more historic view offers greater perspective. By looking back at the previous 75 years of U.S. season average price data and adjusting it for inflation into 2024 Dollars, we can compare the highs and lows points from previous boom and bust cycles. The current price relative to the 75-year average of the season average price reveals how far away from that average prices were in any year (Figure X).

Figure 10. Adjusted SAP

SOURCE: USDA NASS, U.S Bureau of Labor & Statistics

Between 1986 and 2006, the extreme surplus of alpha acid caused by the production of new high alpha yielding varieties without corresponding acreage reduction combined with farmers’ pursuit of growth and consolidation created an alpha surplus. The thinking, as one farmer put it, was that he could “lose less per pound by producing more.” [4] In a completely unregulated market, farmers produced on speculation. Without branded products, they could only compete on price to gain market share. Flush with money from the boom in the early 1980s, they gambled farm equity to fight each other. As a result, prices plummeted far below the long-term average and stayed there.

In the most recent boom, monopolistic control over proprietary varieties added a new dimension of control to the cycle, the perception of sustained artificial scarcity. This, combined with forced long-term contracts and the insatiable desire by American craft brewers for new hop varieties enabled prices to soar. Prices remained at premium levels longer than any period since World War II.

The proper term for this pressure is “Reversion to the Mean”[5]. This Forbes article explains the concept. It’s simple really. The farther away prices move from the long-term average (in either direction) the more likely they are to correct in the next period. It is as if pressure for a correction builds the farther price move away from long-term average prices. Once the pressure becomes stronger than the forces causing prices to be so far from the long-term average, it triggers a reaction. I explained this in greater detail in my January 2023 article entitled “2023 Hop Forecast”. Using previous hop boom and bust cycles for reference, we can infer that season average prices will continue to decline in 2025.

Although these are American prices, the hop industry is global, and the markets are related. The boom and bust cycles are shared by all. What happens in the U.S. affects hop prices in every corner of the globe.

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END OF PART ONE

Stay tuned for the exciting conclusion in PART TWO … and much more!

• The U.S. Hop Industry Profit & Loss Statement

• Market Concentration

• The Delayed Surplus Response (DSR)

• Depletion Rates

• Stocks

• The U.S. Trade Balance

• German industry data

• Inflation

• Global beer production & hop usage

• Conclusion

• Forecast for the future

[1] https://brewingindustryguide.com/rightsizing-the-hop-market/

[2] USDA NASS National Hop Report 2012-2021

[3] According to USDA NASS reported data. Due to the criteria for listing a variety separately, there are many proprietary varieties that fall in the “Other” and “Experimental” category. I estimate at least half of that catch-all category are proprietary varieties. These breakdowns by ownership do not count those varieties.

[4] This comes from the testimony of Mike Smith at the 2003 Federal Marketing Order hearings held in Yakima, Washington. Transcripts from these meetings are available upon request from the USDA.

[5] https://mathworld.wolfram.com/ReversiontotheMean.html

The handful of people who understand the hop market like I do either supply hops to breweries or purchase them for the macros. I am the only hoponomics expert with 20+ years working in the industry, a Ph.D. in agricultural economics and NO ties to merchant/farmer groups. I can help you develop a strategy to time your hop purchases with the changing market, implement tactics to lower your costs and improve your ROI — all at no risk to you. You’ll receive actionable intelligence designed to give you a competitive edge. My goal … help breweries save $10 million on hops. I hope you’ll be a part of it.

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Source: Modern Brewer Podcast Best of 2024 Episode.

LIMITED

I’m offering 25 spots to breweries producing between 1,500 and 500,000 bbl./yr. (1,800 - 596,000 hl./year) anywhere in the world. Sign up before March 31^st to be part of group one. Sign up if you’d like to learn more. If you’re interested, but your brewery’s production is outside this range … sign up anyway. We can discuss the options.

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WHAT YOU GET:

1. Money Back Guarantee: Brewers, if you don’t save more than my fee during the first 12 months, you can have your money back —no risk to you[1].

2. Custom Strategies: Tailored insights and analysis to help you take advantage of opportunities to reduce costs as the market changes.

3. Advanced Market Forecasts: Using a proprietary forecasting model combined with expert analysis I will provide members a clearer picture of the coming crop and the consequences for the market to enable better buying decisions. (Not a brewer but interested in these forecasts? Let me know).

4. Blends: Blends of public varieties that rival proprietary flavor options, promote competition and restore the independent farmer’s freedom to choose what they produce[2].

5. Confidentiality: All information shared will be subject to mutual non-disclosure agreements. Your participation in this program will remain confidential.

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NOT FOR EVERYBODY

If your current approach works for you, that’s great[3]. This service is for brewers who are tired of BIG HOP and want to upgrade their hop sourcing strategy to save money.

If you know somebody who might be interested in taking advantage of this offer, I would appreciate it if you could share this article with them.

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MACKINNON REPORT

I plan to continue writing articles for Substack at no cost for subscribers. I’ll publish my next article, The 2025 State of the Hop Industry, in two weeks. You won’t want to miss it.

[1] Terms and conditions apply. I’ll discuss those with serious applicants.

[2] Hop blends are not included in the consultant service offered. This will only be available once a threshold level of interest has been reached.

[3] Last year, a supply chain manager from a large craft brewery told me, “I don’t care if we’re paying too much for hops.” I was surprised, but it was an eye opener. Not everybody cares about saving money. I imagine the brewery’s owner might not have agreed, but I didn’t take it any further. To each his own.

Figure 1. U.S. hop acreage breakdown in the Pacific Northwest

Source: USDA

HOP CYCLE

The longest bull market in history, which saw prices increase for over a decade, set the industry up for the largest and most rapid acreage decline not caused by prohibition or a World War (Figure 2 & 3).

Figure 2. U.S. Season average hop prices 2011-2023

Source: USDA

“What Goes Up Must Come Down”

- Sir Isaac Newton

Figure 3. U.S. hop acreage changes 2011-2025

Source: USDA[1]

If you’re reading this article, you must be getting some value from it. I’d appreciate it if you could return some value … not by paying anything for it, but by sharing it with a friend who you think might also find some value here.

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I enjoy writing these articles. It’s nice to know people find value in them. If you really want to do something nice since it’s Christmas time, send me a message on LinkedIn and let me know your thoughts.

Now back to the article …

This hop cycle resembles those that came before, but it’s different. According to the timeline of previous hop cycles as outlined by BarthHaas, acreage should continue to decrease as we are still at a period when there is a glut of hops. It’s difficult to pinpoint exactly where 2024 falls on the ellipse, but it is safe to assume the industry has not yet reached the bottom (Figure 4).

Figure 4. Anatomy of a Hop Cycle

Source: Barth-Haas Hops Academy

In the past, acreage decreases preceded prices hitting their low point. Surplus inventory prices are low in 2024, while fresh inventory prices remain high. That’s unique in hop cycle history. Brewers burdened by expensive hops are reluctant to take the loss and sell their contracted inventory at market prices. That too is unique as that has been the fate of merchants in the past.

“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

- Winston Churchill[2]

The power dynamic between merchants and brewers shifted over the past decade. During previous cycles, big brewers dictated the terms of their contract renegotiations. With blatant disregard for the consequences, some abandoned their contracts altogether in 2009[3]. In 2024, only the largest brewers can name their terms.

Today, monopolistic control over proprietary varieties gives merchants unprecedented power over their brewery customers. This might sound like a karmic moment, but the brewers forced to fulfill their contracts in the 2020s are not those who abandoned their contracts a 15 years earlier.

Smaller brewers can’t afford to burn the bridges with the larger merchants (i.e., those who control the proprietary varieties). That’s something many might have considered with a smaller merchant. As a result, aging hop inventory sits in storage waiting to be used.

Image credit: ChatGPT 4o

Brewers fulfilling contracts they don’t need sounds great for merchant/farmers, but it’s a double-edged sword for the hop industry. The losses a brewer might take selling expensive contract hops at lower current market prices are unattractive. Brewers are incentivized to use them instead. Storage and interest fees are much less expensive and the hops can be used for future years’ beer production. The dilemma this creates is obvious. By not rolling contracts forward, merchants reduce the need for future crops.

Due to the ongoing decline in global beer production, this is not a problem isolated to American proprietary varieties (Figure 5). It is true for stable European aroma varieties like Perle, Tradition and Saaz as well. In short, there is no corner of the hop industry that will go unaffected.

Figure 5. World Beer Production Decline

Source: BarthHaas Reports

CORRECTION

Although U.S. acreage has decreased since 2022, the supply correction has not begun in earnest. Relative to production, September 1 stocks from the same year set an all-time record high in 2024 (Figure 6).

Figure 6. Stocks relative to production

Source: USDA

The aggressiveness of the 2025 acreage cuts will determine the speed at which the industry moves through this cycle. If the past is prologue, the supply/demand situation will begin correcting in 2025. With the information currently available, I estimate the surplus will continue until 2027 or 2028. At some point, supply and demand will pass like two ships in the night creating another imbalance unless somebody is proactive about managing supply. Proprietary varieties make a soft market reentry possible in the U.S.

Germany must also reduce acreage. Herkules contracts at 20 Euros/KgA are well below what farmers say they need to breakeven. Many farmers claim they need 30 or 35 Euros/KgA to breakeven due to increased costs and declining yields. Alpha acid is a commodity and sales will go to the low cost producer. Americans eager to keep their acreage will try to compete at these prices. Their Perle/Tradition situation is a different story and will be affected by the challenges mentioned above.

RESTRUCTURING

The hop industry will get much smaller between now and 2030. Brewers might think: “Why does any of this matter?” or “This isn’t really my problem.” or my favorite “The hop industry has been through this before. This is nothing new.”

I’ve discovered that brewers don’t care what happens in the hop industry if they can get their hops. From my time as a merchant, I know most brewers complain that hops are too expensive regardless of the price they pay. Somebody always paid less than them. Their behavior, on the other hand, implies they don’t care how expensive hops are. The reality, I assume, is that most brewers are busy and care, but don’t have time to do anything about it so they need a solution presented to them.

Now that the brewing industry is more competitive, brewers are more inclined to be efficient. It’s in their interests to change the status quo to ensure future prices are not dictated to them by a hop cartel.

Proprietary varieties led to unprecedented hop price inflation (Figure 2). If breweries don’t act before April, 2025, that will be their fate. Once the surplus is gone, premium and increasing prices every year will be the norm for all varieties public and private. Brewers in a more competitive shrinking market will feel the pain (Figure 7)[4].

Figure 7. Changes to the U.S. craft beer market

Source: Beverage Daily[5][6]

Most independent American farms invested in infrastructure over the past 15 years to accommodate growing brewer demand. Proprietary variety owners exploited their neighbors for a quick way to scale production of their varieties. It was a brilliant strategy. Most farmers did not factor in the cost of losing their autonomy. Now merchants are doing something similar by trading access to their markets in exchange for access to varieties. They will suffer a similar fate when they become redundant. As they say … the devil is in the details.

By 2030, there will be fewer hop farmers worldwide. In the October 2001 edition of the Hop Growers of America newsletter Hops U.S.A., I published a graph showing a 96.5% decrease in the number of American hop farmers between 1933 and 2001 (Figure 8).

Figure 8. American Hop Producers 1933-2001

Source: Hop Growers of America

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Based on the current outlook, I estimate the US hop industry should cut another 15-20 million pounds (6,803 - 9,071.94 mt) of production per year in 2025[7]. Based on the 2023 average yield of 1,915 pounds per acre (2.14 mt/ha.), that represents 7,832 – 10,443 acres (3,170 - 4,228 ha.). I believe it’s possible for the number of American farmers in the Pacific Northwest to fall below 50 by 2030.

Look for the net result of 2025 cuts combined with the planting of different varieties to produce what appears to be a lower net decrease. That will make the numbers look confusing on the surface. This will be part of the reshuffling of market share mentioned in the next section. Whatever the level of cuts, they won’t be equally distributed. More power will be concentrated into still fewer hands. Refer to my April 2023 article entitled, “The secret behind who controls the hop industry” to understand who the winners and losers will be.

“Competition is a sin”

- John D. Rockefeller

CHALLENGES

For the market to return to equilibrium several countries must cut below estimated demand and sustain a reduced production level for several years while surpluses are used. Once that has passed, they must then increase acreage to the proper production level. There are at least four challenges with that idea.

1. The increased use of extracts and oils combined with decreasing beer consumption and massive surplus inventories around the world in brewer hands means there is a declining demand for fresh hops between now and 2030.

2. Farm survival while brewers use surplus inventory will present a serious challenge. Farmers in Washington and Idaho will fare better than the rest of the world where the first profitable yield may be in year two or three. Farmers will find it hard to survive the interim period with reduced income and stable fixed expenses. Timing the reentry of new production will be difficult at best. If they continue to produce, however, they perpetuate the oversupply problem.

3. Between now and 2030 farmers will battle for acreage. Americans will grab German alpha market share. Germans will grab market share from their neighbors, many of whom produce substitute varieties. Poland and Slovenia will struggle to compete with Germany except as a low-cost producer. The Czech Republic will fight to maintain the integrity of the Czech Saaz brand as Germans just across the border produce the same variety without the pedigree.

4. The industry has never aligned supply with demand. Overcorrections in both directions are the norm. I believe an overcorrection may be the only way to bring an end to the surplus. Merchant/farmers obsess about not cutting too much acreage because they are all farmers. That, however, delays the surplus response. They should cut as deep as possible and obsess about the reintroduction of supply on the other end. The question is how long to prolong the pain. Although impossible, a one year 100% cut would fix the global supply problem.

OLIGARCHY

If brewers allow the industry to continue down its current path, the next iteration of the hop cycle will be bad for them. With one third to one half fewer farmers by 2030, it will be easier for global hop oligarchs to dictate prices to brewers large and small. The wealthier they grow the more powerful they become. The likely winners have been clear for some time. I wrote about some of them two years ago in my December 2022 article, “Hop Supremacy”.

Reducing market concentration increases the bargaining power for brewers large and small. I’ve heard from some brewers they’re concerned they’ll be cut off from the varieties they want if they offend the big hop merchants. They don’t want to risk that. I’ve been told by others they would change if they had the option. Brewers have all the power. They need to use it. More on how in my next article.

[1] 2024 acreage is an estimate based on the December 10 USDA Crop Production Report available at: https://downloads.usda.library.cornell.edu/usda-esmis/files/tm70mv177/qf85q680x/7m01df76q/crop1224.pdf.

[2] The International Churchill Society https://winstonchurchill.org/the-life-of-churchill/war-leader/1940-1942/autumn-1942-age-68/

[3]https://www.brewersassociation.org/attachments/0000/3982/2010_WSU_Hop_Cost_Of_Production_Study_Producer_Version.pdf

[4] https://www.beveragedaily.com/Article/2024/12/12/craft-beer-market-data-and-trends-for-2025/

[5] available at: https://www.beveragedaily.com/Article/2024/12/12/craft-beer-market-data-and-trends-for-2025/

[6] The chart is gaslighting brewers by implying their market share increased in 2023. That’s not true. According to the Brewers Association, the total market declined while their share of it did not decline as quickly. https://www.brewersassociation.org/statistics-and-data/national-beer-stats/

[7] This may be a conservative estimate. My estimate includes the increase of several thousand acres of alpha producing varieties American farmers plant that German farmers are currently supplying.

BLENDING

In 2024, the U.S. is swimming in a mountain of hops. Meanwhile, several European varieties are short while excess production of similar varieties exist. The answer for some is to blend their problems away. Now is the time of year when varieties that were blended to cover shortfalls are either discovered or slip quietly by. There are quite a few ways to blend. Here a few of the more common[1].

1. In the past, blending was common among merchants. If you had some old Willamettes, for example, a merchant might run them together with the fresh ones. This eliminated old inventory nobody wanted and didn’t cause any harm. If a merchant blended one- or two-year-old Willamettes at a 10% ratio with the fresh hops during the pelleting process, nobody knew and there was no excess inventory buildup. Given the 100-200 million pounds of older hops languishing in warehouses worldwide, this is a practice merchants would be smart to revisit.

2. Another example of blending that was common in the past also occurred in the pellet mill but was done for good reason. Farmers producing aroma varieties with above average alpha acid could always sell their hops easily. They were in high demand to offset hops of the same variety that yielded below average alpha. In this case, both lots would be from the same crop year. When blended, they would make a pellet with a typical alpha content for the variety in question.

3. The pellet mill isn’t the only place where two varieties can be blended. It can happen on the farm. If a farmer is a little short of one variety, he might consider blending a little of one with another on the cooling room floor before bailing. The farmer might label them the short variety and deliver them. In this case, the merchant may be unaware of the situation. He’s happy to be working with such great farmers who deliver on their contracts even in years when the variety is short.

4. I once met a farmer in Europe who took blending to the next level. He planted German Magnum and Herkules in the same field to boost the alpha acid content of his Magnums. It was obvious to anybody who knew anything about hops what he had done since the two varieties look different in the field. Once they’re in the bale, it’s difficult to tell. This was not in Germany so add patent violation to the blending that occured[2]. With the new unitary patent in the EU, producing Herkules outside of Germany could become a violation with serious consequences[3].

5. In some cases, blending can get out of control. Some merchants understood long ago that while pelleting you can blend five to 10 percent of almost any variety together with another and the difference would be difficult to detect to the average brewer. The greater the difference between the varieties, or the lower the quality of the hops being blended, the lower the percentage blended. If you could get some hops for a very low price from somewhere that produces an unknown variety with similar characteristics to a popular variety, by blending this way you could lower the cost of goods sold.

A farmer once asked me a hypothetical question. He asked, “Let’s say you produce a crop in one year and pellet them the next. What year are the pellets when you sell them?” It’s not a bad question. There’s no law requiring the crop year to be labeled and there’s nobody checking. While this is not blending per sé, I include it because it reveals the degree of creativity when money is involved.

There is no other source of information about the hop industry like what you’ll read in this Substack. If you find it interesting or entertaining and would like to see it continue, please consider sharing it with somebody else who might feel the same. Thank you.

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There is no industry-wide standard to objectively verify quality or variety integrity. When nobody is checking, when there are few, if any, consequences, and when the payoff is high, human nature dictates cheating will occur[4][5]. The current system relies on trusting farmers about what they produced. If you’re a brewer and you don’t know the players, you don’t know who can be trusted. Even if you’ve been in the industry a while, you may not anticipate which of your “hop friends” will betray you.

The examples of blending I mentioned are things I have seen or that I was told about by the person with firsthand knowledge. I don’t know the extent to which it happens in 2024. I’m not buying or selling hops, and people don’t often share such things. I would bet money that it is happening somewhere in the world. If anybody is interested, there is a way to check.

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VARIABILITY

In my November 16, 2022 article, “Did you Get the Hops You Paid For?” I wrote about the wide range of characteristics assigned to most varieties.

https://mackinnonreport.substack.com/p/did-you-get-the-hops-you-paid-for

In the article, I noted how Centennial variety alpha acid can be anywhere between seven and 12 percent. The same variety can also produce a wide range of oils. These differences can be from terroir, growing practices and weather fluctuations from year to year. With such variability from lot to lot within a single variety, it’s difficult to know if an off type is present without testing. The traditional methods, like a gas chromatograph (GC) test for example, can be expensive. It’s why some brewers prefer to buy their hops from the same farmer each year. Not everybody (i.e., smaller breweries) has that option.

THE BEST HOPS:

Speaking of getting the “best” hops. Merchants all claim they have the best hops even though most buy them from the same farmers. I have always thought selection during and after harvest is theater. I once hired an olfactory consultant to discuss the value of hop selection. He said that hop selection by smell is a valid practice if a person is properly trained so long as they are not drinking beer during the process. He said after the fourth of fifth sample, a brewer’s nose would be contaminated, and he would lose their ability to discern subtle smells. The selection process is great marketing. It makes for fun posts on Instagram. Everybody leaves happy, convinced they’ve selected the best hops. It makes sense that the breweries that go first, who know somebody on the inside or who spend the most money get the best hops. The others get the best from what’s left. Since the word “best” is subjective, however, everybody can leave Yakima believing the illusion they’re getting the best. It’s in the merchants’ interest to keep brewers in a state of suspended disbelief. In a way, this is related to the topic of blending because hops of the same variety may be blended during the pelleting process. If the size of your order is smaller than the mixer at the pellet mill, can you be sure you’re getting only the lot you selected? The brewers that go last may not even know their position in the hierarchy … but brewers always have fun during the selection process, so it’s not a total loss.

VARIETY CERTIFICATION

In July, 2001, as director of Hop Growers of America, I reported on the industry’s efforts toward variety certification (Figure 1). Some merchants claimed at the time that brewers demanded certification and they were just responding to their needs. I’ve reprinted much of that article below.

Figure 1. Excerpt from July 2001 Hop Growers of America Newsletter

On June 27^th, the U.S. hop industry met in an open meeting to discuss the idea of creating an industry wide variety certification program that would rely upon voluntary participation by growers and merchants. Two U.S. merchants brought the issue to the attention of the industry leading to the meeting. In essence, their proposal is to create a program in which a neutral third party will verify the identity of hop varieties being delivered to the brewery. The current system relies upon the honesty and integrity of the parties involved to delivery what is promised. Proponents of the program suggest random samples could be taken from existing quality samples noting that this would significantly reduce the cost of implementing such a program. Under the proposal, varieties could then be certified as accurate using modern scientific testing methods and if found to be accurate could receive an industry seal of approval that would confirm the variety being delivered is true to type. At this point, the details of such a program remain open although any proposal must allow for the growing demand for generic alpha acid on the world market.

The purpose of the meeting of July 27 was not to create a certification program but to inform interested members of the industry about an issue that is being considered to give those on both sides of the issue an opportunity to air their opinions. The outcome of the meeting was the formation of a working group composed of growers and representatives from the three American hop merchants. The group will investigate the details involved in any potential program and report to the industry at a later date on their findings. Some in the industry have expressed concern that any such program would add an unnecessary layer of bureaucracy to a struggling industry. Overwhelming concern by growers surfaced regarding the cost of a certification program and who will bear those costs. Proponents of the program say that costs can be kept at a minimum by using existing records and record keeping techniques already in place due to ISO certification, a program in which all three merchants already participate. Those who remain skeptical of the proposal predict the expense involved with such a program would be ominous and would inevitably be passed on to the grower, an idea even growers in favor of the program do not support. Another point in question among growers is the demand for such a program among the world’s breweries. At this time, growers are caught between merchants claiming their customers regularly ask for variety certification and merchants who claim there is no demand for such a program among the world’s brewers, a case of one merchant’s word against another.

Brewers concerned with variety integrity obviously have the most to gain by the implementation of any such program. While any program would require growers to be more diligent about their rouging and picking efforts, they too stand to benefit through the increased awareness among the world’s brewers regarding the natural efficiencies of certain varieties and the costs associated with producing those varieties.

In the European Union, varieties are certified. The certifications are not based on scientific testing methods so they may not be worth the paper they’re printed on despite their official stamps and seals.

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SOLUTIONS

I wrote that Hop Growers of America article nearly a quarter of a century ago. Since there is no industry-wide variety certification program today, it is safe to assume the program failed. Maybe brewers are no longer interested in knowing if they get what they pay for. If they are, there are affordable options that weren’t available when I wrote that original article.  A properly designed program could detect fraud with 100% certainty by implementing two technologies that weren’t available to the average person in 2001.

BLOCKCHAIN

A European friend who sells hops and I recently discussed the idea of a blockchain to record and track hop production from one end of the supply chain to the other. A blockchain would enable perfect tracking of every pound of hops produced from the farm to the brewery. A buyer would know from whom they purchased hops and to whom they sold them. Neither would know the identity of any parties beyond that. Everybody’s identity would be open and visible on a blockchain but without knowing which wallet belongs to which entity there would be no way to decipher who sold to whom, like today … but a blockchain alone would not be a solution to the on-farm blending I mentioned in number three above.

DNA

According to the National Human Genome Research Institute, the cost of DNA analysis has dropped by multiple orders of magnitude over the past 20 years (Figure 2)[6].

Figure 2. Decreasing cost of DNA sequencing 2001-2022

The typical human genome has about three billion base pairs of DNA[7]. Plants are different. Some plants are simple[8]. Many plants genomes are much longer and more complicated than human genomes. The longest, Paris japonica, has 50 times more base pairs than the human genome[9].  In addition to technological advancements, scientists have developed ways to further reduce the cost of DNA analyses[10][11]. Whole genome sequencing costs have decreased[12]. More importantly, it’s not necessary to sequence an entire genome to know whether a batch of hops is true to type. Molecular markers make it easier to match sample DNA to a known standard to determine if the sample is true to type[13]. That’s simpler and much more affordable. Today, portable equipment is available that enables partial gene sequencing in the field[14].

CONCLUSION

Complete traceability would be easy to implement using 2024 technology. A system combining a blockchain and DNA analyses would eliminate all blending. A black market could exist, but buyers of black-market hops would risk a lot to gain a little. An effective system would cost less than $0.01 per pound of hops. It would solve the issue with the mystery pellets mentioned above and it would reveal off-types. It would guarantee transparency and variety integrity and could be in place before the 2025 harvest.

Merchants and farmers aren’t talking about variety certification anymore. Did brewers change their mind and decide ignorance is bliss? If asked, merchants would claim they maintain variety integrity. Yakima Chief Hops™ has their Green Chief® program for just this purpose[15]. I would also want to control the certification process if I was a merchant. Depending on the circumstances, people are divided on the merits of corporate self-regulation[16][17]. In a world where everybody from politicians to priests lie, should brewers really trust the hop industry? If that sounds ridiculous, consider this … Is changing the system possible given the cartel-like structure in control?

“Quis Custodiet Ipsos custodes?”

(Who is watching the watchers)

-       Juvenal (Satire VI lines 347-348)

A blockchain/DNA system would provide total transparency and traceability. These are things the industry says they favor. For some reason, they stop short of implementing a fool proof system or anything resembling objective quality standards.

A real Hop quality program like the one proposed here, if it existed, could only be demanded by brewers immune from merchant consequences. That means breweries too big to threaten (i.e., anybody from a big craft brewery up to the largest brewers in the world). Smaller breweries risk having their supply cut.

At the end of the conversation, we agreed the whole variety integrity idea was a great, but the industry has more to gain by not having a certification program than it does by creating one.

… Caveat Emptor!

[1] I’m not accusing anybody of blending in 2024 or suggesting that the practice is widespread. From my experience, I have seen that the opportunity to profit causes people to do things they wouldn’t normally do. I am suggesting is that in a year where there are shortfalls in some varieties there is a higher likelihood that unsanctioned blending will occur, and that merchants and brewers might should be more vigilant.

[2] Herkules are only supposed to be produced in Germany according to current patent laws. I know of Herkules production in several other countries. The new unitary patent laws could change that.

[3] https://www.epo.org/en/applying/european/unitary/unitary-patent

[4] https://www.npr.org/2012/06/04/154287476/honest-truth-about-why-we-lie-cheat-and-steal

[5] https://www.forbes.com/sites/adamhartung/2016/01/23/why-cheating-is-prevalent-and-we-cant-stop-it/

[6] https://www.genome.gov/about-genomics/fact-sheets/DNA-Sequencing-Costs-Data

[7] https://www.genome.gov/genetics-glossary/Base-Pair

[8] https://phys.org/news/2014-12-pocket-sized-genomes.html

[9] https://www.sciencedaily.com/releases/2010/10/101007120641.htm

[10]

https://www.pacb.com

[11] Bhérer, C., Eveleigh, R., Trajanoska, K. et al. A cost-effective sequencing method for genetic studies combining high-depth whole exome and low-depth whole genome. npj Genom. Med. 9, 8 (2024). https://doi.org/10.1038/s41525-024-00390-3

[12] Caulfield T, Evans J, McGuire A, McCabe C, Bubela T, Cook-Deegan R, Fishman J, Hogarth S, Miller FA, Ravitsky V, Biesecker B, Borry P, Cho MK, Carroll JC, Etchegary H, Joly Y, Kato K, Lee SS, Rothenberg K, Sankar P, Szego MJ, Ossorio P, Pullman D, Rousseau F, Ungar WJ, Wilson B. Reflections on the cost of "low-cost" whole genome sequencing: framing the health policy debate. PLoS Biol. 2013 Nov;11(11):e1001699. doi: 10.1371/journal.pbio.1001699. Epub 2013 Nov 5. PMID: 24223516; PMCID: PMC3818164.

[13] Zhou, H., Li, S., Liu, J. et al. Identification and analysis of the genetic integrity of different types of rice resources through SSR markers. Sci Rep 13, 2428 (2023). https://doi.org/10.1038/s41598-023-29514-y

[14]https://nanoporetech.com/platform/?utm_campaign=Search+brand+sequence+terms+24&utm_campaign=DG+Categories+-+Sequencing+General+Terms+-+North+America++-+Target+CPA&utm_source=digital_gearbox&utm_source=bing&utm_medium=bing_search&utm_medium=ppc&utm_content=platform+page&utm_term=dna+sequencing+method&hsa_acc=1905654280&hsa_cam=14425433506&hsa_grp=1172081150715376&hsa_ad=&hsa_src=o&hsa_tgt=kwd-73255359336103:loc-4085&hsa_kw=dna+sequencing+method&hsa_mt=p&hsa_net=adwords&hsa_ver=3&msclkid=d5b3ed468e2215c35b868a5d7c282674

[15] https://www.yakimachief.com/green-chief

[16] https://www.hrw.org/news/2017/11/14/corporate-self-regulation-global-crisis

[17] https://www.forbes.com/sites/neilmalhotra/2019/03/04/why-self-regulation-can-pay-off/

I contacted the Journal and explained the problem with the misinterpretation of the data thinking it was an innocent mistake[1]. I showed in my article how they confused variety and regional yield data, which led them to incorrect conclusions. The editor’s assistant responded that same day[2]. Two weeks later, I received an email from the senior editor and team manager at Nature Communications saying they were looking into it[3]. One year on, the article is still live on their website. It has been accessed over 23,000 times[4], and ranks among their highest-scoring pieces (#41 of 63,208)[5].

Source: Altmetric.com

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METHODS

The methods used by Dr. Martin Možný from the Department of Climate Change Impacts on Agroecosystems at the Global Change Research Institute of the Czech Academy of Sciences together with properly interpreted data would have created the impression that climate change benefits hops. This, in my opinion, would also be a travesty. The method ignores new product and variety innovation, effects of the market, surpluses and deficits and changing consumer preferences. Perhaps climate change plays a role in the equation. We don’t know. A more thorough analysis would be necessary to reach that conclusion. At best, the study conducted demonstrated correlation, not causation.

GELL-MANN AMNESIA EFFECT:

Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray's case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the "wet streets cause rain" stories. Paper's full of them. In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.

-       Michael Crichton

---

ANOTHER PAPER?

Would you be interested in reading or contributing to an article that uses the best available data and people knowledgeable about the industry to determine the effect, if any, climate change has on hops? I’ve spoken with a couple people who are already interested in participating. With more interest and support from co-authors across Europe, it would be a topic worth investigating.

If you have an opinion on that, please vote in an unscientific anonymous poll over on Urbanpoll.com. Your identity will remain completely anonymous[6].

CLICK HERE TO VOTE

THE $64,000 QUESTION

The Journal of Nature Communications that published the article has an Impact Factor (IF) of 14.7[7]. In academia, that means that they are perceived as having strict guidelines for publishing. It seems, however, peer reviewers critique the methods used to analyze data not the data’s accuracy. That is how this article slipped through the cracks.

“Never attribute to malice that which can be adequately explained by stupidity.”

-       Hanlon’s Razor (Robert J. Hanlon)

MOTIVE

Did the Journal of Nature Communications and the Department of Climate Change Impacts on Agroecosystems purposely mislead the public by printing this article? I think it’s more likely they were victims of confirmation bias. As the old saying goes, “If your only tool is a hammer, then every problem looks like a nail.” 

In an ironic twist of fate, the Journal Nature, published an article in December 2023 touting how publishers are “smashing annual records” as they retract more sham articles than ever before[8]. The fact that nobody retracted the hop article after being informed of the problems with the data is suspicious. It creates the appearance of either a bias or an ulterior motive. I’ll leave the final interpretation of their actions for you to decide.

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[1] To whom it may concern:

An article appeared this month in your publication Nature Communications that contained inaccurate information. Here is a link to the article:

Climate-induced decline in the quality and quantity of European hops calls for immediate adaptation measures - Nature Communications

nature.com

Due to the inaccuracy of the historical data used, the projections and conclusions were wrong and the article title is misleading.  I detailed where the mistakes were made in an article on my substack today. Here is the link:  https://mackinnonreport.substack.com/p/climate-change-is-not-coming-for

I would recommend the article be withdrawn from the journal and the study performed again using accurate data before it is considered for publication. 

Regards,

Douglas

[2] Dear Douglas,

Thank you for your email and for sharing your concerns. I have forwarded your email to the handling editor of this manuscript, so they are now aware of your concerns.

Best,

Kileigh

Kileigh Ford

she/her/hers

Editorial Assistant

Nature Communications

[3] Dear Dr MacKinnon,

Thank you for alerting us to your concerns about this publication. We take any issues raised seriously. Nature Communications is a member of the Committee on Publication Ethics (COPE). We are investigating this matter in line with COPE guidelines.

Regrettably, we cannot share details of specific publications and investigations surrounding them with anyone other than the parties that are directly affected. However, I can reassure you that we will continue to investigate and take appropriate editorial action.

If you would like to share any more details of your concerns, you are welcome to do so.  As part of our investigation, we may need to share this information with the authors of the publication, their institution or other organizations. Although we will make every effort to ensure your anonymity in our communications with these groups, there may be a chance that your identity might be guessed from the information you provide – particularly as we understand that you have already shared some of your concerns directly with the authors.

Best regards,

Emily Jones, PhD

(they/them)

Senior Editor and Team Manager

Nature Communications

Nature Portfolio

Springer Nature

One New York Plaza, Suite 4500

New York, NY 10004-1562

Email: emily.jones@us.nature.com

ORCID: http://orcid.org/0000-0002-0605-884X

http://www.nature.com/ncomms

[4] https://www.nature.com/articles/s41467-023-41474-5/metrics

[5] https://nature.altmetric.com/details/155286296

[6] According to Substack, Substack polls anonymize results, which means that other voters cannot see who voted and how, but it still allows the owner of the Substack to see who voted and how (

PubStack Success

Substack Reader Surveys, Part 2: Viewing and Using Results

Hey there…

Read more

2 years ago · 22 likes · 12 comments · Karen Cherry

). I have no interest in seeing who votes or how they vote so I created a poll over on Urbanpoll.com where your identity remains anonymous. Have a look at their site if you have any questions about that.

[7] https://www.nature.com/ncomms/

[8] https://www.nature.com/articles/d41586-023-03974-8

Figure 1. USDA March and September Hop Stocks Report data graph as presented by the USDA

Source: USDA NASS[1]

Figure 2. USDA March and September Hop Stocks Report data table as presented by the USDA

Source: USDA NASS[2]

WHAT DO THE NUMBERS MEAN?

In 2023, the growth in merchant/farmer inventory slowed. The 2023 September 1 hop stocks data created the impression that acreage cuts were correcting the surplus. The 2024 September 1 Hop Stocks report data, when analyzed in detail, reveal that merchant/farmer inventory soared to record highs while brewery inventory continued to decrease (Figure 3).

Figure 3. Inventory held by brewers vs. merchant/farmers

Source: Prepared using USDA NASS data

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If you read the MacKinnon Report, you understand that a few powerful people control most of the proprietary varieties. The same people control the largest hop merchant companies in the world. Their power enables them to influence, supply, farmer contracts, brewery contracts and global distribution. They exercised that power first by forcing brewers into five-year contracts. Another example of their flexing that power was in correcting the surplus by restricting supply in 2023 and 2024 while keeping prices from crashing. That was unprecedented in the history of the industry. They have the power to force all but the largest breweries to fulfill their contracts. Brewers fear not getting the varieties they want more than they loath high prices. They won’t risk offending their suppliers, so they do as they are told. A merchant can feel when he has the upper hand over a brewer. Considering the money flows from the brewing industry, it appears the tail is wagging the dog. According to the Federal Reserve’s definition, it’s a great example of an oligopoly dominated by a few large companies[3].

Despite all that power, the market found itself once again in what appears to be the hop cycle. This is not your father’s hop cycle. Everybody got a little excited by the billions of dollars flowing into the hop industry between 2012 and 2022. Mistakes were made. Five-year contracts continued far beyond the point where they were justified. I can attest to the fact that it’s hard to say no when a brewer is begging to sign a contract at stupid prices.

For the IP owners, this was their first time trying to manage supply using their new power. One of my favorite sayings in Russian is, “Первый блин комом” (the first pancake always has lumps). It means you can’t expect things to go right on the first try. They’ll do better next time. That should scare brewers more than the idea of not getting the trendy new proprietary variety, but in 2024 they don’t seem to care.

The guys who own the IP will get another chance to hone their tactics. They alone are guaranteed a seat at the table in the future. Everybody else’s future is uncertain. There are three challenges they must overcome.

1. With one crop per year, there is one chance each year to adjust supply.

2. The industry decision-makers own hop farms in addition to their merchant companies, IP and in some cases breweries. That farmer bias influenced their decisions. The last thing a hop farmer wants to do is remove trellis. History shows an extreme market event (i.e., 2007-2008 & 2012-2022) is necessary to rebuild. An outsider may think high prices are a dream come true for farmers. The truth is high prices wreak havoc and lead to irrational decisions that create years of imbalances. There is plenty of incentive to keep that from happening. It seems to avoid such a price spike industry power brokers tried to engineer a soft landing (i.e., to match supply to demand). They must overcome their farmer bias. There are two options. I alluded to these during my recent discussion on the Modern Brewer podcast with Chris Lewington, but I will discuss it in more detail in a bit.

3. During their attempt to ease into equilibrium, brewer demand decreased. Now they have no idea where demand is … if they ever knew to begin with. They will need to identify demand and focus on producing a deficit that is large enough to maintain premium prices but small enough to keep the market from panicking.

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EXPORTS/IMPORTS

The reason for the surge in merchant/farmer inventory is likely the global trend toward lower hopping rates and decreased beer consumption. According to the 2023 Hop Growers of America (HGA) Statistical Report, U.S. exports in 2023 decreased 9.1 million pounds (4,152 mt) from 2022[4][5]. According to the U.S. Census Bureau, which offers current, exports Between September 2023 and July 2024 were down 3.6 million pounds lower year on year. August data was not available at the time of this writing[6]. Last year’s August data was 2.3 million pounds. If we use that as a placeholder until a new number is reported, exports for 2023-2024 will be 36.2 million pounds (16,420.2 mt) 1.3 million pounds (589.7 mt) lower than the previous year. Declining exports are a result of decreased demand overseas. You don’t move hops around the planet if you don’t need to. I doubt the lower demand for American hops is due to recent EU pesticide regulations causing a bottleneck in hops going into Europe, which members of the International Hop Growers Convention (IHGC) claimed would cost the industry €100 million[7]. I question the accuracy of that number[8]. The affected hops will need to be replaced, that’s true, but the hops in question will not be destroyed. If anybody incurs losses, they will likely be additional shipping expenses for hops to parts of the world for which they were not intended and the price difference between fresh crop and aged product. I covered the European pesticide situation in my March 2024 article, “Pesticides, Hop Stocks and Germany's Growing Problem”.

Back to the numbers. The Census Bureau reported that imports of foreign hops in between September 2023 and July 2024 decreased by 3.7 million pounds[9]. Again, that data does not include August. In August 2023, however, there were no imports. We will assume that will also be the case in 2024 (Figure 4).

Figure 4. U.S. Hop Exports and Imports 2014-2024

Source: Prepared from Hop Growers of America Statistical Report and U.S. Census Bureau data

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DEPLETION

The difference in depletion between 2023 and 2024 was 16 million pounds of hops (Figure 5)[10]. To give perspective to the situation, depletion between 2023/2024 was lower than 2019/2020 when Covid forced the closure of bars and taprooms around the world.

Figure 5. U.S. Hop Depletion 2014-2024

Source: Prepared using USDA NASS data

That means the moderate decline in exports during the past 12 months alone do not account for what is happening. If that were the case, we would look at figure 5 (above) and interpret years 2017 through 2022 as producing a deficit of hops. That’s not true. During a deficit, we should expect depletion to increase as a percentage of available crop. It is not enough to measure real numbers as depicted in figure 5 above because the size of the crop grew during that time. Measuring the percent depletion of available crop paints a more accurate picture. The percent depletion considers the depletion figure relative to the total available supply[11] (Figure 6).

Figure 6. Percent depletion of U.S. crop 2014-2024

Source: Derived from USDA NASS statistics

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If demand is stable and supply decreases, we can expect the percentage of depletion to increase as surplus inventory moved into the market. During a surplus situation, we can expect the percentage to decrease as less inventory moves. Measuring the percent of depletion is an excellent way to monitor the surplus/deficit situation.

Don’t Forget:

Brewers will hear they need to contract going forward despite the surplus to help merchant/farmers. Without contracts, merchant/farmers will say they don’t know how much to produce. They should not forget the current surplus born from the contracting tactics from the old paradigm that told them how much to produce. Traditional contracting tactics created the surplus. The coming hopocalypse was born from a reluctance to change. It may be out of merchant/farmer control considering the level of financing most American farms have that allows them to produce beyond their means. That is the real reason for the push for contracts. Don’t let anybody tell you any different. The sad thing the coming consolidation of power will bring is the disappearance of independent hop farmers and merchants. Unless brewers begin to purchase more public varieties, they will be driven from the industry.

WHERE IS DEMAND

The difference in depletion between 2023 and 2024 in figure 6 (above) was 5.5 percent. Based on the total available supply for the previous 12 months of 234 million pounds (106,141 mt), that percent decline represents a decline of 12.8 million pounds (5,806 mt) fewer hops moving out of inventory than during the previous 12-month period. That is a good indication of the degree to which demand has decreased.

The 2023/2024 Barthhaas Report documented a decrease global beer production of 16,887,000 hl between 2022 and 2023 (Figure 7). Considering a hopping rate of 5.68 g/hl, that would result in a decrease of 95.9 mt of alpha. Based on reported yield data for German Herkules from the same report, that equates to 274 hectares (676.8 acres)[12][13].

Figure 7. Barthhaas global beer production estimates for 2022 and 2023

Source: 2023/2024 Barthhaas Report

Between 2019 and 2023, U.S. craft beer production decreased from 26.27 million barrels (30,8 million hectoliters (mil. hl.) to 23.35 million barrels (27.4 mil. hl.), a decrease of 2.9 million barrels (3.4 mil. hl.) (Figure 8). At an average hopping rate of a conservative 1.5 pounds of hops per barrel, that represents 4.35 million pounds (1,973 mt) of hops[14].

Figure 8. Brewers Association craft beer production estimates for 2023

Source: Brewers Association

The hopping rate has continued to decrease[15][16]. At the moment, nobody seems to know where demand is. The industry has been so far off target, it will take time to reacquire reality. The soft-landing strategy prolonged the problem. If the decision-makers were not blinded by their farmer bias, they would realize a fast overcorrection would fix the surplus. They would try instead to create a soft take off on the other side of the deficit they create.

If you’ve made it this far in the article, you must have found some value in it. If so, I would appreciate it if you could subscribe if you haven’t already.

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WHAT TO EXPECT IN 2025

The next 12 months will bring the first signs of the acreage reductions that began in 2022. When added to the 139 million pounds (63,050 mt) in inventory in the U.S. before harvest, the 84 million pounds (38,102 mt) harvested in 2024 reveals that there will be 223 million pounds (101,152 mt) of hops available[17]. The good news … yes, there is good news! That continues the decline in total available inventory that peaked in 2022 at 245.6 million pounds (111,403 mt). The 2024 acreage cuts will make a difference. They bring the industry closer to balance. The bad news … the hard part comes next.

It appears the industry cut enough acreage to bring annual production close to the annual movement of hops (perceived as consumption). The next acreage cuts will be tough. They will cut below demand to move eat into the surplus. Their size will determine how quick the industry reaches the other side of the surplus. A deficit is necessary to move existing surplus inventory into the market.

During the next few years, the closure of independent merchants, farms and craft breweries combined with decreasing demand will complicate the task of identifying demand. The industry is fortunate to know the general direction it’s moving. The removal of an additional 5,000-10,000 acres from production in the U.S. in 2025 would create an annual deficit between 10 and 20 million pounds (4,343 - 8,686 mt). Barring any crop failures in the next few years, that would eliminate the surplus sometime between 2027 and 2030. The deeper the cuts, the sooner the industry reaches the other side.

The net number of acres reduced going forward won’t be so important though. What that number is made of will matter more. The next few years will be turbulent. American farmers will offer aggressive pricing to avoid removing trellis and to avoid going out of business. Some aroma acreage reductions will be offset by alpha acreage plantings. That will force the removal of alpha acreage in Germany (i.e., the next front). I discussed this in my November 2023 article, “A silent hop crisis is brewing”.

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HOP CYCLE

Cutting deeper than the annual supply/demand balance sounds extreme, I agree. It’s no more extreme however than producing more than the market needs year after year. When the industry is overproducing, prices are good. Everybody thinks they can afford a few small mistakes. Those mistakes accumulate over time. In the past, the market regulated the process. Nobody knew where demand was then either. This is nothing new. In the past, by the time a deficit appeared, farmers, starving for revenue forced contracts and planted unregulated public varieties causing a surplus sending prices plummeting.

For decades, hop merchant/farmers dreamt of controlling supply. If they could do that, they believed they could manage the hop market. Life would be good. Today, they have that power and must learn how to wield it.

“Be careful what you wish for; your wish may be granted.”

-       Aesop’s – The heardsman and the lost bull

For those who haven’t lived through a hop cycle yet, I explained how it works in my February 2023 article, “The truth behind the hop surplus” (Figure 9).

Figure 9. Lifecycle of a hop surplus/deficit

Nineteen months have passed since I wrote that article. Today, the “YOU ARE HERE” bubble is closer to the dotted red vertical line and annual demand is declining.

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“The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.”

-       Ecclesiastes 1:9

THE SOLUTION?

There is something different this time. On the other side of the surplus there lies the potential for a strictly regulated supply of aroma hops in a mature market with premium prices. This is due to the disproportionate amount of proprietary varieties in the world today. To get there, the industry must endure the most difficult part of the contraction. What remains to be seen is how an industry with the infrastructure to service over 60,000 acres will be efficient with one third fewer acres. This too is nothing new. It happened in the hop industry between 1996 and 2004. Those were desperate times for many.

In the past, by the end of the surplus portion of the cycle, the absence of idle trellis made expansion expensive. It sense to manage the reentry rather than the decline. The industry being unprepared for the reentry is what causes prices to skyrocket. If idle trellis remains available to facilitate the inevitable acreage increases in 2027 and beyond, reentry into the market will be smoother and prices will not spike. It costs money to maintain idle acreage. The people whose responsibility it is to manage the decline have royalty money they could use to subsidize idle trellis. That would facilitate a softer acreage expansion on the other side of the deficit, which would be for the good of the industry.

With all the focus on the surplus of aroma varieties, an old familiar friend of the hop industry has been lurking in the shadows waiting to rear its head. If industry leaders get the aroma market under control between now and 2030, it appears the world is gearing up for a good old fashioned alpha battle. Every year I have worked with hop farmers and merchants, I’ve heard people say, “this year is going to be interesting”. Whatever the supply situation in the coming years, there will be no shortage of “interesting” times ahead.

[1]https://www.nass.usda.gov/Statistics_by_State/Regional_Office/Northwest/includes/Publications/Hops/2024/hops0924.pdf

[2]https://www.nass.usda.gov/Statistics_by_State/Regional_Office/Northwest/includes/Publications/Hops/2024/hops0924.pdf

[3] https://www.stlouisfed.org/open-vault/2023/may/what-makes-a-market-an-oligopoly

[4] https://www.usahops.org/img/blog_pdf/474.pdf

[5] In its statistical report, HGA reports exports from September (year n-1) through August (year n).

[6] https://usatrade.census.gov/index.php?do=login

[7] https://www.ihgc.org/wp-content/uploads/IHGC_Statement_DG-SANTE_Bifenazate-MRL_2024.pdf

[8] I know of at least one hop farmer who either doesn’t understand the idea of mitigated damages or lacks the moral compass to report them honestly. With that in mind, I suspect this was an exaggeration designed to get attention and increase the perceived significance of the regulation change.

[9] decreased by 1.1 million pounds (522 mt) between 2022 and 2023.

[10] This means 16 million fewer pounds of hops were withdrawn from U.S. warehouses between September 2023 and 2024 than were withdrawn between September 2022 and 2023.

[11] Total available supply is comprised of the previous September 1 hop stocks and the previous year’s crop before they are affected by imports and exports.

[12] https://www.barthhaas.com/resources/barthhaas-report

[13] Based on time of harvest estimates

[14] https://americanhopconvention.org/assets/img/misc/Brewer-Panel-Bart-Watson.pdf

[15] https://www.brewersassociation.org/statistics-and-data/national-beer-stats/

[16] https://www.brewbound.com/news/bart-watson-us-hop-supply-unsustainable-brewers-need-to-be-prepared-for-market-to-correct-itself

[17] Before exports and imports between September 2024 – August 2025

From June 10-24, Yakima Chief Hops™ offered 25% off on specific lots of Citra®, HBC 394 and Mosaic®, HBC 369 in what they called a “Flash Sale” (Figure 1)^[1]. Low prices do work to move some hops. The problem with them is that they don’t increase demand.

Figure 1. Yakima Chief Hops™ Flash Sale Instagram Post

Source: Instagram

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HOP DEMAND

Hops have an inelastic demand. That’s economist lingo that means there is very little change in demand resulting from a change in price (Figure 2)^[2][3].

Figure 2. Inelastic versus elastic demand.

Source: Economicshelp.org

Examples of products other than hops with inelastic demand are gasoline for people who own cars, college textbooks for students or lifesaving medical procedures for people with potentially terminal diseases^[4][5]. There’s some amount those people need to buy no matter what the price. Hop merchant/farmers know that brewers can’t brew beer without hops. They know they can charge high prices when brewers believe their hop supply is threatened. That’s one reason why merchants/farmers and the organizations representing them highlight events creating supply insecurity. Information that doesn’t serve that purpose isn’t promoted. I demonstrated examples of the industry using propaganda in my May 2023 article, “Propaganda, half-truths and fear porn”^[6].

The other side of inelasticity does not favor the hop industry. When there is a surplus, prices crash. Many brewers walk away from contracts, buy cheap spot market hops instead of their expensive contracted inventory or delay payments by a year or more causing. It is always during these times that merchant/farmers resort to discounting prices to increase sales. The mistake is to confuse sales with demand. Cheap prices don’t increase a brewer’s hop usage. Oftentimes, cheap hops purchased at a discount today are used to satisfy future demand. It’s a great opportunity for brewers.

Contrast hops with fast food. In 2023, there were 201,865 fast food restaurants in the United States^[7][8][9]. The U.S. Centers for Disease Control (CDC) reports that 37% of Americans eating fast food daily^[10][11]. Dissatisfaction with soaring prices resulting from inflation have resulted in fewer sales^[12][13]. To stimulate demand this summer, U.S. fast-food chains are waging a value war to attract customers back^[14]. It may be too little too late as consumers opt to eat at home to save money^[15]. Unlike hops, when fast food is too expensive consumers can opt to not buy fast food. Substitutes for expensive and less efficient hop products exist, but they are still hop based. When prices skyrocketed in 2007, many macro brewers switched to extracts and downstream products to save money. At best, downstream products are a double-edged sword. Their success reduces the total demand for hops^[16]. Fortunately for farmers, so far craft brewers have been slow to adopt them citing off flavors, undesired cloudy haze, or lack consistency from batch to batch as barriers.

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HOP SUPPLY

Hops have an elastic supply. That means that changes in price result in changes in production (Figure 3)^[17]. This is especially true of unregulated public varieties, which farmers are free to plant without permission from a patent owner. With proper management that does not have to be the case with proprietary varieties.

Figure 3. Elastic supply graph

Source: Economicshelp.org

Supply elasticity has been the cause of and solution to the hop industry’s decades-long battle with supply. The free market regulated production through the hop cycle^[18]. Between 2012 and 2023, however, U.S. hop acreage grew to over 70% proprietary varieties. The variety owners had the power to regulate supply. Adherence to an archaic and inappropriate contract system prevented them from aligning supply with demand. This resulted in the largest hop surplus in history^[19]. Brewers should assume they will not make this mistake again.

Thousands of inexperienced craft brewers entering the industry between 2012 and 2022 accelerated and exaggerated the misalignment between supply and demand. Delayed signals between changing hop demand don’t align with slow changes in supply created by five-year contracts. Annual production cycles don’t align well with changing seasonal brewing demands. That and farmers producing “a little extra” to ensure they fill their contracts regardless of market changes (i.e., Covid) guarantee oversupply. Under normal circumstances, the risk of oversupply from contracts is worth the recurring income. Rising interest rates made carrying the surplus expensive.

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DISCOUNT BACKLASH

Five effects of selling hops at a discount^[20]:

1)    They inflate the perceived demand for hops,

2)    They increase hop sales … not hop usage,

3)    They mask and delay signals to decrease future production,

4)    They encourage continued overproduction,

5)    They decentralize the oversupply making it more difficult to track.

So if low prices are so bad, why do merchant/farmers offer discounted prices? As somebody who has sold discounted hops in the past, it’s simple. They bring in revenue. They get rid of hops you don’t want to see in storage anymore. At some point it’s smart to cut your losses. Discounts fix a merchant/farmer’s surplus problem in the short-term. If you don’t make it through the short-term, the long term doesn’t matter.

“In the long run, we’re all dead”

-       John Maynard Keynes^[21]

A brewer may lead a merchant/farmer to believe they’re buying for unsatisfied demand. That may be true. It may also be that the brewer saw the low price as an opportunity to save money for next year’s production. Hint hint brewers.

PRO TIP:

Brewers willing to pay for hops on delivery will be able to negotiate very low prices between now and October 2024. Smart brewers know that last year’s crop is just as good as this year’s crop. Really smart brewers will know that hops from the 2020 crop can still be excellent. The propaganda that “fresher is better” was used to move the current crop. The truth is that under the proper storage conditions, hop shelf life can be six years or more^[22]. The perceived value of older hops will decrease still further after harvest. Their brewing value doesn’t change just because a new crop is available. Brewers should look for value opportunities between now and harvest as merchants make room for new inventory and following harvest as they try to move older inventory at any price. The position each merchant holds will determine the varieties, and the extent to which they will discount prices. I have found that most brewers don’t know how to negotiate hop prices. They don’t do it often enough. This is a buyer’s market. Brewers who don’t haggle deserve the high prices they get.

It’s safe to assume brewers buying hops at discounted prices now will use some of those hops to produce beer after the 2024 harvest. Beer consumption and hop usage doesn’t increase because the price of hops decreases 25 or 50 percent. Discounted hops push the surplus problem out into the future. That’s part of the delayed surplus response (DSR), a term I coined during my doctoral research^[23]. Regardless, merchant/farmers need to stop the bleeding and make room for a 2024 crop that will yield 78-80 million pounds (35.4 - 36.3 mt.). It’s still early to make forecasts, but I’ll make one. I think the September 1 U.S. hop will be approximately 124 million pounds (56,246 mt.). Assuming that is close, and that the 2024 U.S. crop yields 80 million pounds (36,287.7 mt.), there will be 204 million pounds (92,533.7 mt.) of hops in warehouses in Yakima by October. This does not include hops stored around the world. That’s still a massive surplus.

The good news for the hop industry is that the 2024 harvest marks the beginning of the efforts to fix the surplus. The bad news is that at the current rate, it will take another three to four years to bring September 1 hop stocks back in line with historical averages (Figure 4). At the time of this writing, the end of the U.S. hop harvest is nine weeks away. Brewers can expect more sales soon.

Figure 4.  Estimated September Hop Stocks situation

Source: USDA, *2024 estimate calculated by Douglas MacKinnon

READING THE HOP LEAVES

That YCH tried to move 2023 inventory rather than older inventory is significant. This is when those varieties should be used by breweries. That company is long on those varieties. For that reason, non-owner farmers producing those varieties (if there still are any) can expect more cuts in 2025.

The February BSG sale that offered $0.25 per pound ($0.55 per kilogram) for crop year 2016 was different. It represented a last attempt to recoup value for hops before they were written off as a total loss. For more on dumping old inventory, you can read my May 13, 2024 article, “M.O.A.B. The Mother of All Busts”.

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BRANDED VS. GENERIC

Deep discounts on surplus branded proprietary varieties with high alpha, although bad for the market for many reasons, are better than selling them into the extract market from a cash flow perspective. The two varieties YCH discounted could make good generic hop extract^[24]. I’ve heard from reliable sources that this happened to preserve the branded market price. There are three big problems with selling branded craft varieties into the generic extract market.

1. The alpha market is saturated,

2. Extract and downstream products can last in storage for a decade or more, and

3. The price in the generic extract market can be 70% less than the branded variety market price to craft brewers.

The problem with a sale like that offered by YCH in June is that brewers are wondering,

“Why am I paying the full price when they can sell them for 25% less?”

Discounted prices indicate:

1. Desperation … resorting to price-based competition eliminates the advantage of branded products,

2. Cash flow problems,

3. The varieties creating the most serious surplus for the merchant offering the sale,

4. A lack of ideas to move product into the market,

5. The collapse of the branded supply management strategy.

BRANDED VS. PUBLIC

Intellectual Property (IP) is attractive because the monopoly it offers eliminates price volatility, which plagues non-branded commodities^[25]. According to the USDA, market concentration (e.g., one company owning the IP on 50% of American hop acreage) undermines price competition^[26]. The return to price-based competition demonstrates the severity of the 2024 surplus.

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NOTE TO BREWERS: This surplus problem will be fixed. When it is, you will pay the price merchant/farmers dictate again … and more. So long as you believe your survival depends on proprietary varieties, and if you aren’t big enough to use your size to get low prices, you empower proprietary variety owners. If you’re ok with them charging you whatever price they demand, stay the course. If not, now is the time to find public variety substitutes to diversify your hop bill and reduce your dependency on somebody else’s IP. Once the surplus is fixed, I believe the strategy will be to create a perpetual deficit of proprietary varieties. Brewers will be happy to sign contracts at inflated prices again. So, enjoy the discounted prices while they last.

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^[1]

^[2] https://towardsdatascience.com/price-elasticity-data-understanding-and-data-exploration-first-of-all-ae4661da2ecb

^[3] https://www.khanacademy.org/economics-finance-domain/microeconomics/elasticity-tutorial/price-elasticity-tutorial/a/price-elasticity-of-demand-and-price-elasticity-of-supply-cnx

^[4] https://www.thebalancemoney.com/inelastic-demand-definition-formula-curve-examples-3305935

^[5] https://biz.libretexts.org/Courses/Lumen_Learning/Book%3A_Microeconomics_(Lumen)/07%3A_Module_5-_Elasticity/7.15%3A_Examples_of_Elastic_and_Inelastic_Demand

^[6]

MacKinnon Report

Propaganda, half-truths and fear porn

CONTRACTING IN A SURPLUS Since my last article, so many readers shared their experiences with me[1]. Thank you! Some shared that their hop merchants are urging them to contract for 2024 and 2025 now. They said this year’s acreage reductions will mean the varieties they want will be in short supply. This is the type of half-truth fear porn brewers might h…

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3 years ago · Douglas MacKinnon

^[7] https://www.cbsnews.com/news/mcdonalds-price-increases-fast-food-cost-popeyes-wendys/

^[8] https://www.cnbc.com/2024/05/04/why-fast-food-price-increases-have-surpassed-overall-inflation.html

^[9] https://www.nbcnews.com/business/consumer/mcdonalds-fast-food-rising-prices-backlash-rcna137709

^[10] https://www.latimes.com/science/sciencenow/la-sci-sn-fast-food-america-20181003-story.html

^[11] https://foodiepen.com/fast-food-industry-statistics/

^[12] https://www.fastcompany.com/91144641/mcdonalds-summer-menu-deals-5-value-meal-free-fries-fridays-price-fast-food

^[13] https://www.nbcnews.com/business/consumer/long-predicted-consumer-pullback-hits-restaurants-starbucks-kfc-rcna150299

^[14] https://www.restaurantbusinessonline.com/food/fast-food-chains-wage-value-war-get-customers-door

^[15]

^[16] https://bsgcraftbrewing.com/tns-hop-oils-fragrant-and-flavorful-solutions-for-more-efficient-brewing/

^[17] https://towardsdatascience.com/price-elasticity-data-understanding-and-data-exploration-first-of-all-ae4661da2ecb

^[18]

MacKinnon Report

2024 Hop Market Forecast

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2 years ago · Douglas MacKinnon

^[19]

MacKinnon Report

What Hop Merchants Won't Tell You About the Surplus.

BIGGER ISN’T BETTER In my February 2023 article, “The Truth Behind the Hop Surplus”, I mentioned how the data suggested that the surplus was at least 54 million pounds (24,494.2 mt). I believe that was conservative. I’ll explain how in this article…

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3 years ago · Douglas MacKinnon

^[20] I say this as somebody who has learned from my own mistakes and experience. This is not a condemnation of anybody else.

^[21] https://www.socratic-method.com/quote-meanings/john-maynard-keynes-in-the-long-run-we-are-all-dead

^[22] https://pim.hopsteiner.de/en/products/slv

^[23] https://www.researchgate.net/publication/362849068_The_delayed_surplus_response_for_hops_related_to_market_dynamics

^[24] Generic hop extract is extract where the variety of the hop does not matter. The customer is simply interested in the bitterness provided by the alpha acid.

^[25] https://blogs.worldbank.org/en/developmenttalk/commodity-markets-evolution-challenges-and-policies

^[26] https://www.ams.usda.gov/reports/agricultural-competition-plan-support-fair-and-competitive-markets

The hop industry is approaching a tipping point. It’s not because of the size of the acreage reduction. It’s the way it happened and who was responsible.

The most recent USDA report is evidence that competition in the hop industry is dying. Once the surplus has been eliminated, if brewers do not purchase more public varieties, there are several ways the brewing industry will suffer.

1)    There will be fewer hop varieties available.

2)    Available varieties will be proprietary.

3)    Hops will be more expensive than today and their prices will increase every year.

4)    Mandatory contracts will come with ominous terms and conditions.

Once the cartel recovers from the surplus and resecures their monopoly, they will have carte blanche over prices and variety availability. This may seem like a ridiculous prediction today. In 2024, we are still 3-4 years away from these things becoming obvious. By then, it will be too late to change course.

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To all brewers out there, large and small, if you don’t want the prices of your hops dictated to you, and if you don’t want merchants locking you into long-term contracts with draconian terms and conditions, it’s important that you share the information in this article with other brewers. The wider you can spread the message the greater the chance you will change the direction of the hop industry. I have kept these articles free and easy to share to make that happen. Now it’s all up to YOU. You will get the hop industry you deserve.

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HOP ACREAGE STRUNG REPORT : Analysis

If you’ve not already seen the strung report, it’s available for you to download here. There have been several other people who have rushed to report the statistics. In my opinion, the data is the least interesting aspect of the strung report. You can read those for yourself on the USDA web site … and you should. The story behind those numbers is much more important. They reveal that a hostile takeover of the U.S. hop industry is happening now that will affect independent farmers worldwide.

The surplus was led by the demand for proprietary varieties. You might think the correction might involve reducing the acreage of more proprietary than public varieties. Not so! The reduction is also not equally distributed among independent farmers and those with ownership in a merchant company. While the industry is experiencing a hop cycle of sorts, the dominance of proprietary varieties makes this correction different than any other[1]. Along with a disproportionate amount of acreage, independent farmers have lost their freedom. They are no longer free to decide the varieties they produce or the prices at which they can sell them.

The winners are being chosen … not by the market, but by decree. The winners in the 2024 hop industry will be those that are allied with the owners of the popular proprietary varieties. They won’t be the best or the most efficient farmers. Like the Soviet Politburo, central planners have decided who will continue to produce and how much will be allocated to them[2]. When profitable, they will favor their farms and those of their cronies[3].

“The proletariat will use its political supremacy to wrest, by degrees, all capital from the bourgeoisie, to centralise all instruments of production in the hands of the State” ^[4]

-       Karl Marx – Manifesto of the Communist Party, Chapter 2

THE TREND IS NOT YOUR FRIEND

In 2024, 74.71% of hops strung in the Washington, Oregon and Idaho (i.e., the Pacific Northwest (PNW)) are private varieties owned by a few people whose wealth has increased beyond imagination during the past decade[5]. Proprietary variety royalties likely exceeded $200 million during that time[6][7].

FUN FACT:

The previous record for proprietary acreage was set in 2020 when 73.78% of the U.S. crop produced were branded proprietary varieties.

The market concentration is thriving during the acreage cuts demonstrating that the power resulting from proprietary varieties is effective in both buyers’ and sellers’ markets (Figures 1 & 2). The trend is not in the best interest of brewers.

Figure 1. Percentage of proprietary hop varieties harvested in the PNW 2000-2023

Source: USDA NASS

Figure 2.  Percentage of proprietary hop varieties strung in the PNW 2019-2024

Source:  USDA NASS

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WEAPONIZED HOPS

The intention of a patent is to give the inventor an exclusive 20-year period to recoup their investment[8][9][10]. Hop patent owners want to extend their patent rights beyond that 20-year period[11]. That’s why they always use the brand name together with the patent name. I believe the future will see the continued weaponization of branded proprietary hop varieties to extort billions of dollars from the brewing industry. They’ve already proven that’s possible.

Complicating things for independent merchant/farmers … owners of the most popular proprietary varieties also own the world’s largest hop processing and storage facilities and control global distribution networks. Merchant/farmers risk being ostracized if they oppose the cartel and their proprietary variety dominance. Rather than complain, they self-censor their speech.

Proprietary varieties enable supply controls. This allows them to dictate price. The consequences of the 2023 and 2024 U.S. acreage reductions will make and break some farms. It may seem strange to tout the advantages of proprietary varieties during the hop surplus they caused[12]. Traditional contracting methods, greed and untested merchant/farmer power combined with a brewer fear of missing out (FOMO) created the surplus. Human nature was responsible. The surplus will be gone in a few years. I believe when that happens the hop and brewing industries will witness the dominance possible via proprietary varieties.

HOPOCALYPSE NOW

According to the USDA, public hop variety acreage was cut by 32.82% between 2023 and June 2024. That’s almost double the proprietary variety acreage reduction, which declined by 16.53%[13]. Public varieties and everything they represent are being targeted for destruction. Greater market concentration is a goal of the hopocalypse. I wrote about that in my April 2024 article, “Will Craft Beer Bring the Hopocalypse”.

The industry is consolidating into fewer hands. Those hands reside in Washington State. Without change, independent merchant/farmers worldwide will disappear. Those with proprietary variety ownership believe they are safe today[14]. They may be safer than some of their competitors. For that reason they have been lulled into a false sense of security. Their time will come. The hop industry is a zero-sum game. Merchant/farmers are not content if somebody else is making money they could be making. I have experienced the jealousy and envy resulting from people whose love of money surpasses their moral decency.

“For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.”

-       1 Timothy 6:10 KJV

Three years ago, independent American farmers thought they were safe. Today, they know that’s not true. As I discussed in my June 10, 2024 article, consolidation has begun at the farm level[15]. Mega corporate hop farms will be the future unless brewers seek an alternate path. If a farm can produce 4,000 acres (1,619 ha.) of hops, it can produce 10,000 (4,048 ha.). It’s a management issue. In the long-term, every hop farmer is at risk.

BREWERS : YOU ARE THE RESISTANCE

What can you do to change the situation?  If you’re a brewer … craft or macro … regardless of where in the world you brew … the solution is simple. Support independent hop farmers. Buy Public. It doesn’t matter who you buy from, but buy public. When you buy public, you enable independent farmers to stay in business. If you care about paying reasonable prices, buying public encourages competition. Buying public will strengthen the public breeding programs that can also produce amazing varieties.

Buying public is the one thing you can do that will make a difference. The brewing industry survived for centuries without proprietary hop varieties. There is no reason brewers must depend on them now.

Increased market concentration guarantees increased prices, encourages inefficiency and discourages innovation, which leads fewer varieties from which to select[16]. When the hop market is controlled by a cartel, the needs of the cartel itself will be the priority. Brewers need only to look at prices and contracting terms over the past decade to get an idea of what is yet to come.

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[1] https://brewingindustryguide.com/rightsizing-the-hop-market/

[2] https://www.economicshelp.org/blog/glossary/central-planning/

[3] https://corporatefinanceinstitute.com/resources/economics/free-market/

[4] https://www.marxists.org/archive/marx/works/1848/communist-manifesto/ch02.htm

[5] For the sake of this article, I have assumed that half of the varieties listed in the “other” and “experimental” categories are proprietary. Based on varieties like Pekko®, ADHA-871, which were not independently reported in the June 2024 survey, it is reasonable to assume 50% of the other and experimental categories are proprietary.

[6]

MacKinnon Report

4 Secrets Brewers Don’t Know About Proprietary Hops

Proprietary varieties are a Trojan horse and craft brewers have let down their guard. For centuries, the hop market experienced cycles of high and low prices due to recurring shortage and surpluses. Brewers enjoyed low prices during the surplus years, which outnumbered the high-priced shortage years ten to one. When a shortage came, every dollar the bre…

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3 years ago · Douglas MacKinnon

[7]

MacKinnon Report

The secret behind who controls the hop industry

There are a handful of varieties brewers have wanted for the past decade. You know the ones. Only licensed farmers can grow them. Only licensed merchants can sell them. Not all brewers understand that because those varieties are proprietary some farmers and merchants are excluded. There is nothing inherently wrong with proprietary varieties. They’re gre…

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3 years ago · Douglas MacKinnon

[8] https://patentmastery.com/what-happens-when-a-patent-expires/

[9] https://www.uspto.gov/patents/maintain

[10] https://www.upcounsel.com/expired-patents-uspto

[11]

MacKinnon Report

Will Craft Beer Bring the Hopocalypse?

The world’s independent merchants and farmers are under attack. Under the status quo, the industry will be under new management by the end of the decade. This won’t be good for brewers unless they enjoy record high hop prices. It won’t be good for independent farmers and merchants. They will either find their place by partnering with the establishment o…

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2 years ago · Douglas MacKinnon

[12] https://mackinnonreport.substack.com/publish/posts/detail/145486047?referrer=%2Fpublish%2Fposts

[13] These calculations were achieved by assuming half of the “other” and “experimental” acreage was proprietary. Then, the difference between the USDA acreage strung reports from 2023 and 2024 was calculated.

[14]

MacKinnon Report

The secret behind who controls the hop industry

There are a handful of varieties brewers have wanted for the past decade. You know the ones. Only licensed farmers can grow them. Only licensed merchants can sell them. Not all brewers understand that because those varieties are proprietary some farmers and merchants are excluded. There is nothing inherently wrong with proprietary varieties. They’re gre…

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3 years ago · Douglas MacKinnon

[15] https://mackinnonreport.substack.com/publish/posts/detail/145486047?referrer=%2Fpublish%2Fposts

[16] https://www.oecd.org/daf/competition/market-concentration.htm

Empty hop trellis in Oregon

THE WILLAMETTE VALLEY HOP BANKRUPTCY PLAN

For those who have not already read the March MacKinnon Report on the Willamette Valley Hops Bankruptcy (WVH), you might want to read that first.

When you’re in a Chapter 11 bankruptcy, the debtor (Willamette Valley Hops (WVH) in this case) must submit a “Debtor’s Plan of Reorganization” (the plan) to explain if and how he plans to repay his creditors. In a typical Chapter 11, this is a straightforward process. When one or more of the creditors negotiates in bad faith with an ulterior motive of driving the debtor out of business the process can be derailed[1]. The WVH plan submission was scheduled for May 20. The judge extended the deadline to June 3 at the debtor’s request. The WVH plan consists of several parts.

1.     WVH agrees to repay their outstanding tax liabilities ($1.25 million) plus interest within 60 months.

2.     WVH agrees to repay U.S. Bank the $942,078.83 in full plus 10% interest within 60 months. WVH proposed selling property belonging to Bruce Wolf to repay this debt.

3.     WVH agrees to repay a loan of $648,263.33 to Bruce Wolf and his wife that was guaranteed by the debtor.

4.     For claims exceeding $15,000, which total $8.7 million, WVH proposes to repay creditors approximately 11% of the amount owed between April 2025 and September 2029. Specific payments will be determined based on the proportion of money they are owed relative to the total. If the plan is accepted, payments will be on the schedule below. The WVH 11% estimate is in real dollars. It does not consider the reduced value of future dollars due to inflation. Projecting forward using the current annual inflation rate of 3.5%, the percentage to be repaid is 9.8% of the roughly $8.7 million outstanding claims (Table 1) [2][3][4].

Table 1. WVH proposed payment schedule and payments adjusted to present value accounting for inflation.

Source: WVH Debtor’s Plan of Reorganization, filed June 3, 2024

5.     For claims less than $15,000, creditors, WVH will pay 90% of their claims within 90 days of the plan’s confirmation. Creditors with claims greater than $15,000 can join this group. They would receive $13,500 in exchange for satisfaction of their claim.

Analysis

I’m not a lawyer and I don’t play one on the internet. I suspect there will be negotiation prior to this plan’s approval. I think creditors will believe they deserve the $648,263.33 WVH would like to repay Bruce Wolf and his wife. There will be other parts of the plan to which people object. Since there is no creditor’s committee, this will be the judge’s decision. Unsecured creditors (of whom John I. Haas is the largest) are owed over eight millions of dollars. While the payments may seem trivial, they are better than nothing. I suspect everybody involved has reached that conclusion. The challenge going forward will be for WVH to survive in a buyer’s market without access to suppliers who may not want to work with them. Through their proposal, they create a situation where creditors risk losing very little if WVH goes out of business. Whether WVH can survive to fulfill the payments mentioned in the plan is key to the plan’s approval. If it is not approved, they may need to convert their chapter 11 to a chapter 7 liquidation plan.

Given the decreased value of future dollar payments proposed by WVH, unsecured creditors owed $137,755.10 or less would be smart to accept the proposed $13,500.00 payment within 90 days of plan confirmation. The alternative would result in their receiving a smaller sum over a longer time (i.e., from 2025 to 2029). All of that assumes WVH can continue to survive in a very difficult hop market.

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ANOTHER ONE BITES THE DUST

On May 14, Brew Culture announced it will be closing with the statement below, which is reprinted in its entirety below and may be found on the company website.

Dear Valued Customers;

It is with a heavy heart that we announce the impending closure of Brew Culture. After careful consideration and evaluation of current market conditions, we have made the difficult decision to cease operations due to challenges posed by the global hops surplus, increased competition within the Canadian market, industry downturn, and overall economic challenges that continue to persist.

This decision was not made lightly, and we understand the impact it may have on our loyal customers and team members. We want to express our deepest gratitude for your support and patronage over the past 10+ years. Your loyalty and trust have meant the world to us, and we are truly grateful for the opportunity to have served you.

Unfortunately, despite our best efforts to weather the storm, the challenges facing our industry have proven insurmountable. The combination of continued economic uncertainty, and intensified competition within the Canadian market, has created a highly challenging business environment making it unsustainable for us to continue operation.

We want to assure you that we are committed to a smooth transition during this difficult time. Here are some important details regarding the closure;

·      Closing Date: Our exact closing date will be determined after a liquidation period on all in stock inventory.

·      Customer Support: Our customer support service team, and local representatives, will be available to assist with any inquiries or concerns you may have during the transition period. Please don’t hesitate to reach out for assistance at info@brewculture.com, or call 1.877.889.2739.

·      Liquidation Sale: We will be holding a liquidation sale effective immediately, where you will hae the opportunity to purchase remaining inventory of Hops, Malt, Yeast, Brewing Aids, and Cleaning Chemicals at 50% Off. We encourage you to shop online at brewculture.com for live inventory and pricing.

·      Hop Contract Customers: A Brew Culture representative will contact you directly to discuss options available for fulfillment directly with hop suppliers, or the cancellation of your contract.

In an effort to limit disruption to your production, we advise you to contact our partners directly for all other non-stocked brewing needs.

Analysis:

I believe we will see several more notices like this from other small to midsize merchants in the next year or two. The easy money that came from the craft beer boom is gone. The company appears to be cutting its losses rather than finding a way to serve their customers in the face of increased competition in Canada. In the end, Brew Culture’s competitors will absorb their business. They will not be missed. This is not a criticism of Brew Culture. The same fate awaits every merchant/farmer that doesn’t have a unique selling proposition (USP). They too will announce “with a heavy heart” … yadda yadda yadda. We are witnessing the Wal-Mart Effect happening to hops[5].

I don’t know how Brew Culture treated their customers, or whether there were good people who worked there. They were small and local. Now they are gone. In their place, a global cartel will serve their customers. I believe these giants will be kind at first. When the market stabilizes, they will dictate prices, availability and terms. It’s a classic bait-and-switch[6]. Their goal is total market dominance. The owners of craft breweries should understand why it is important to support small independent merchants. They are the hop equivalent of a craft brewery … but these are difficult times. Everybody needs to save money to survive. What then is the argument for drinkers of craft beer to support their local brewery? We must support local or we will there will be very few choices in the future.

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If you find my articles valuable in any way, I would like to ask you to return some of that value by subscribing or sharing it with somebody else who might find it valuable. A few months ago, I decided to charge for these articles. Thank you to the many people who subscribed to support my work. That was a mistake. I discovered that charging for the articles took the joy of writing out of the process. I would rather continue to write these articles and provide them for free and enjoy the process than sell them and lose the pleasure in writing. Those who paid for a subscription received a refund. That is why I ask that you please consider subscribing to this Substack if you haven’t. You can also share the articles to spread the word and enlighten brewers around the world. That would make writing them even rewarding. Thank you.

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CLASH OF THE TITANS

On May 20, Roy Farms and Loftus Ranches announced a new partnership (Figure 1). You may have heard of Roy Farms as they sell hops direct to brewers[7]. For those of you who haven’t heard of Loftus Ranches, it’s owned by the Smith family[8]. That’s the same Smith family that is an owner of Yakima Chief Hops (YCH)[9] and Yakima Chief Ranches (YCR)[10]. you’ll see a page about Loftus Ranches. It is through YCR that they own part of the Hop Breeding Company (HBC)[11].

Figure 1. Press Release regarding Loftus-Roy Partnership

Analysis:

I’ve been contacted by several people asking what I think this means. I want to preface my comments by saying that I don’t have any inside information from either of these companies. The opinions below are mine and mine alone as is the case with the analyses in this entire article.

Several people who read the press release thought that perhaps this meant that Roy Farms is now part of YCH. Below is my interpretation of the announcement and its significance.

Roy Farms owns the ADHA (now Latitude 46) together with Greenacre Farms[12]. According to the 2023 USDA National Hop Report, the total acreage for the ADHA varieties Azacca®, ADHA-483 and Pekko®, ADHA-871 was 1,446 acres (585 hectares)[13]. That’s not enough acreage to sustain those two farms at the level to which they had grown accustomed prior to the 2023/2024 mandatory acreage reductions. The other four varieties owned by the group (i.e., Summit™, Adeena®, ADHA 218 and ADHA 1624) were not published by the USDA in 2023. That means they were not produced on more than three separate farms and fall in the other category. Most varieties that fit that description lack the necessary demand to warrant production on more than three farms.

The owners of Loftus Ranches (i.e., the Smith Family) has partial ownership in Yakima Chief Ranches, Yakima Chief Hops, the Hop Breeding Company, Balebreaker Brewing. Those are the highest profile hop-related entities. There are many more. I explained their involvement with cited sources in my April 2023 article entitled, “The secret behind who controls the hop industry”. The proprietary varieties to which they have access can easily fill Loftus Ranches acreage. I suspect Loftus did not have mandatory acreage cuts in 2023 and 2024.

Most farmers in the Pacific Northwest produced Citra®, HBC 394 or Mosaic®, HBC 369 for HBC-affiliated merchants. These two varieties have been two of the three most widely-planted varieties since 2020 (Figure 2).

Figure 2. Hop Growers of America Top Ten Pacific Northwest Varieties by Acreage.

Source: Hop Growers of America Statistical Report.

According to the YCH website, Roy Farms is not an owner in YCH[14]. As a non-owner of YCH, there is a good chance they were one of many independent farms forced to cut acreage of those and other proprietary varieties in 2023 and 2024. I explained why independent companies like Roy Farms were vulnerable is in my November 2023 article, “A Silent Hop Crisis is Brewing”.

The press release references the younger generation (i.e., Patrick Smith and Michael Roy) instead of their fathers (i.e., Michael Smith and Leslie Roy). This is a significant sign of a generational transition taking place behind the scenes as the elder generation takes a less prominent role. My personal belief is that the elders negotiated this deal due to its sophisticated nature.

In my opinion, the move has the potential to be brilliant for both parties. Loftus gains access to idle acreage and efficient picking capacity without building or buying it. They can grow faster and at lower cost than their competitors (i.e., every other hop farm in the Yakima valley … including other YCH owners who should be concerned as this may signal long-term intentions). Roy Farms can avoid downsizing and removing efficient infrastructure into which they invested heavily. Roy Farms attaches their infrastructure to YCH-related demand despite the fact that they are a non-owner. Opportunities like this offer a chance at future survival. They will be limited.

The risk for Roy Farms is that Loftus grows stronger while Roy Farms grows weaker. That could lead to the absorption of Roy Farms hop-related facilities by Loftus Ranches. That may not be obvious today, but in 2021 this type of partnership would have been unthinkable. I am reminded of the merger between the YCH craft division and HopUnion. That led to the ultimate disappearance of HopUnion[15].

If craft brewers continue their insatiable demand for proprietary varieties, farmers who lack access to popular varieties will have difficulty finding a future in the industry. Farms that produce proprietary varieties can produce public varieties. The opposite will not always true as consolidation continues. The access to additional acreage and picking capacity this agreement provides supplants the need for several smaller farms. That enables an accelerated industry wide consolidation. I believe it insulates Roy Farms from further HBC-related acreage reduction while allowing them to remain independent. That means they have a chance for success in the future. Farms that want to succeed need to be in the game going forward. They’re not guaranteed success by any means. If they aren’t in the game, they cannot win. Many farms will struggle to survive the coming hopocalypse[16].

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HOPSTEINER ACREAGE ESTIMATES

In mid-May, Hopsteiner Germany published global acreage estimates for 2024. These data, which they made available on their web site and on Instagram, provided a first look at U.S. acreage changes. They paint a clear picture of a contracting industry with the greatest amount of change coming from the U.S. (Figure 3).

Figure 3. Hopsteiner 2021-2024 global acreage estimates

Source: Hopsteiner[17]

USDA acreage figures for the Pacific Northwest will be available in the second half of June. I will wait to provide my analysis of the data until then. While I have no doubt the Hopsteiner numbers are accurate, USDA statistics have been the base for U.S. data comparisons for decades. For consistency, I will continue to use them. 

Hopsteiner has several Instagram pages that appear to give realistic assessments of current growing conditions. The Hopsteiner UK page published a May 2024 Hop Crop Report in early June that appears to give a good unbiased view of growing conditions.

During May, the Hopsteiner Instagram page posted multiple weather updates that provided accurate reports of growing conditions in the U.S.

If you haven’t already followed the Hopsteiner pages on Instagram, and you’re interested in knowing what’s happening in the industry, you might consider following them. Of course, they post Hopsteiner promotional posts like their competitors. They seem to understand the principles espoused by Gary Vaynerchuk in his book “Jab Jab Jab Right Hook”[18]. In it, Gary states you should be giving much more value to your audience than you are asking from them.

Posting accurate reports about growing conditions should be the industry norm. It’s not. Social media posts by merchant/farmers often try to sell something or exaggerate concerns over weather and pest related problems to create the impression the crop is in jeopardy. I believe they do this to create contract demand and sales. Since brewers may not know any better, they believe what they read. That’s a greedy strategy.

Thank you Hopsteiner for introducing honest reporting and great educational material into the social media mix. I hope more merchant/farmers begin to follow your lead to encourage greater transparency in an opaque industry.

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WATER WATER EVERYWHERE

Heavy rains in Germany flooded towns across the hop growing regions. As the Instagram page of the German Hop Growers Association (verbanddeutscherhopfenpflanzer) shows, hop fields were not spared. Although it looks bad, as mentioned by the association in their post (translated from the original German), it is too soon to say whether the crop will be affected. That depends on the weather conditions in the coming weeks.

Source: Instagram[19].

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IHGC MAY MEETING

On May 17, 2024, the International Hop Growers Convention (IHGC) met in Freising, Germany[20]. Representatives from each country in attendance presented a report on the situation in their production area. They highlighted acreage changes and trends in supply and demand. They commiserated about the surplus and its effect on the market while trying to find a solution. Although I was in Germany that week, I did not attend the meeting. Meetings are open to members only. For the past few years, the most valuable IHGC information is behind a paywall with restricted access. The merchant/farmer collusion I discussed in my September 2022 article, “Who Sets Hop Prices … and How?” however is effective at disseminating this type of information behind the scenes. There are no secrets for long in the hop industry.

As a result, I was able to read the merchant market report. In it, there were plenty of details that hop nerds like me love reading. I won’t bore you with those though as none of them were unique to the IHGC. The merchant report was more interesting. It contained an article published in the German Hop Growers Magazine in March 2024 titled “Hop Market – Quo Vadis”[21]. As I could not find that article anywhere online, it is included in its entirety below (Figure 4).

Figure 4.  March 2024 German Hop Growers Magazine article “Hop Market – Quo Vadis”

Press release German Hop Industry Association

Hop market - Quo vadis?

We are pleased to take the half-time of the marketing campaign for the 2023 harvest as an opportunity to present the current market situation to you and to take a look into the near future.

Although the slowdown in the global economy in previous years did not usually have a direct impact on the brewing industry and the hop industry apparently came through the pandemic years 2020 and 2021 better than expected, in retrospect influences have accumulated that are the cause of the visible turna- round in the hop market.

The inflation that set in after the pandemic had an impact on the hop market, with the result that the brewing industry worldwide was confronted with considerable cost increases in the amount of 20-25% and purchasing power was weakened at the same time. As a result, beer consumption patterns changed on almost every continent, making a return to pre-pandemic beer output levels a distant prospect.

The disruptions to supply chains that began in the same period caused numerous brewery customers to increase their physical stockpiling in 2022 being in concern about supply - an effect that became apparent last year, when physical stocks began to be reduced after supply chains returned to normal and a noticeable decline in call-offs characterized market activity. As a result, the seemingly brisk call- off behaviour in the calendar year 2022 gave a false picture of the actual demand situation.

For all these above mentioned reasons, a cumulative stock of at least one normal harvest equivalent to approx. 110,000-120,000 tons of raw hops has probably built up globally, of which an estimated 25% relates to the European market. These roughly estimated stocks of hop products with a market value of around 250 million Euros of German or European provenance are mainly held by hop marketing com- panies in cold storage facilities in Germany. This is increasingly leading to major financial burdens due to increased interest rates and storage costs. The purchasing behaviour of the brewing industry has visibly changed in recent decades, similar to other sectors. While it used to be common practice for the hops ordered by the brewery for the upcoming brewing year to be delivered to the brewery relatively shortly after the harvest, paid for and stored there, storage has increasingly been switched towards hop marketers over the years.

A visibly more restrictive alcohol policy in the leading industrialized nations, fears of inflation, political crises and the demographic ageing of society are not helping to strengthen beer sales and are hindering the reduction of stocks sold under contract but not delivered. In addition, there are increasing changes in recipes, with cost savings being generated by switching from more expensive aroma hops to bitter varieties.

All these factors mean that the hop industry is reaching its limits along the supply chain in terms of financing and storing stocks, which are mainly financed by loans from banks, which in turn are placing increasing demands on their borrowers.

In order to bring the market back into balance in the foreseeable future, the acreage would have to be noticeably reduced in order to adapt to the lower demand situation. Particular attention should be paid to some flavor varieties whose global demand is declining disproportionately. There is currently no acute oversupply of marketable bitter varieties of German origin, although the general reluctance to buy can also be felt in this segment.

In this context, in order to ensure a stable and reliable supply chain from hop growers to brewers, all market participants are required to negotiate the adjustment of preliminary contracts, for which the ne- cessity of each adjustment varies depending on the merchant, and to meet their respective responsibil- ities for correcting acreage and adjusting contract volumes.

This is particularly important because hop growers in Germany currently still have a high proportion of preliminary contracts until 2025. Sustainable follow-up contracts on the part of the brewing industry are essential for maintaining production at cost-covering prices beyond this period in order to provide secu- rity in planning for the coming decade. A lack of follow-up contracts after the 2025 harvest could lead to the acreage reacting too strongly, with many hop growers reducing or even giving up hop growing.

Pascal Piroué

Chairman
German Hop Industry Association

Pfaffenhofen, March 4, 2024

In my opinion, the most noteworthy part of the Quo-Vadis article was:

“a cumulative stock of at least one normal harvest equivalent to approx. 110,000-120,000 tons of raw hops has probably built up globally, of which an estimated 25% relates to the European market.”

For anybody who may not be so comfortable with the metric system, 110,000 – 120,000 tons of raw hops translates into 242,5 – 264.5 million pounds of hops! That sounds like a lot of hops. I believe the cumulative stock mentioned in the article is a conservative estimate of the surplus. Over the past 20 years, the industry has stored an increasing volume of hops for the brewing industry. Since 2011, it has become common to store the equivalent of two years of U.S. hop production (Figure 5).

Figure 5: Depletion of U.S. stocks relative to total supply

Source: USDA

The Quo Vadis article mentions raw hop inventory. Figure 5 represents total hops, processed and non-processed, domestic and foreign, that moved from inventory between September 1 and March 1 of the following year. Factor a three to seven percent loss based on the type of processing (i.e., pellets or extract). If the hop industry held no aging inventory in storage for breweries, the ideal depletion rate would be 50% by March 1^st, halfway through the year. Because the hop industry has moved to holding an increasing amount of aging inventory for the brewing industry, the depletion number is much lower. The lower this number goes the greater the financial burden for the companies holding that inventory … and the higher the price of hops must be. While it may be tempting to blame breweries for not taking their inventory in a timely manner, the surplus is a self-inflicted wound. Forced long-term contracting results in surpluses. I’ve explained why merchant/farmers push contracts in my August 2022 article, “The Con in Hop Contracts”. I’ll explain in a future article how contracts guarantee surplus production every year.

The 2024 depletion number in figure 5 above should be at least 25% for the brewing industry to make steady progress toward using the two years of inventory in storage in a timely manner. Ten of the past 12 years have been below 25% depletion. This is evidence of overproduction and a growing inventory problem. Despite the acreage reductions of 2023 and 2024, the situation has not improved.

The Quo-Vadis letter referred to the additional expense associated with financing hop inventory. That is an important part of the problem that brewers may not see at first. The cost of storing over two years of hops worth more than over one billion dollars is now over $100 million per year. The U.S. Federal Reserve (FED) is not expected to decrease interest rates when it meets on June 11th and 12th [22]. The interest and storage fees charged by various merchants are do not pay for the principal associated with the growing surplus.

Surplus Market Sales Tactics

This has the potential to change the way hops are sold in the future. In March 2023, I wrote an article called “Surplus Contracting Tactics” which you should read if you want to understand the hop cycle. I believe once the surplus is fixed the next wave of sales to brewers will include more innovative ways to supply breweries. They will find a way to lock in brewers to capture value and supply hops while somehow enabling flexibility to revise contracted amounts. If they do, this will be a welcome relief to the old ways that served the needs of hop merchant/farmers. Any new system will survive until a shortage arrives, at which time the industry will revert back to locking brewers in for five years by threatening not to produce. Why … because in a seller’s market hop merchant/farmers capitalize on brewer fear to get whatever they want.

[1] https://drescherlaw.com/chapter-11-three-reasons-why-reorganizations-fail/

[2] https://www.capitalpress.com/state/oregon/hop-merchants-founder-to-sell-farm-under-proposed-bankruptcy-plan/article_74ce930a-237e-11ef-b52b-df7fe87a1642.html

[3] https://tradingeconomics.com/united-states/inflation-cpi

[4] https://www.rl360.com/row/tools/inflation-calculator.htm?Currency=1&AmtSaved=130000.00&YrsToKeep=5&InflRate=3.5&Calculate=Recalculate

[5] https://www.investopedia.com/terms/w/walmart-effect.asp

[6] https://www.merriam-webster.com/dictionary/bait%20and%20switch

[7]

https://shop.royfarms.com

[8]

https://www.loftusranches.com

[9] https://www.yakimachief.com/commercial/about-us/our-company

[10] https://yakimachiefranches.com/history/

[11]

https://www.hopbreeding.com

[12]

https://latitude46.com

[13]https://www.nass.usda.gov/Statistics_by_State/Regional_Office/Northwest/includes/Publications/Hops/2023/hops1223.pdf

[14] https://www.yakimachief.com/meet-the-growers

[15] https://brookstonbeerbulletin.com/hopunion-merges-with-yakima-chief-craft-division/

[16] https://mackinnonreport.substack.com/publish/posts/detail/143473720?referrer=%2Fpublish%2Fposts

[17] https://marketing.hopsteiner.de/hubfs/campaigns/Anbauflächen%20Update/2024-05_acreage-forecast.pdf?utm_medium=email&_hsmi=87685343&utm_content=87685343&utm_source=hs_email

[18] https://www.amazon.com/Jab-Right-Hook-Story-Social/dp/006227306X

[19]

[20] https://www.ihgc.org/activities/freising-germany-2/

[21] “Quo Vadis” is Latin for “Where are you going?”

[22] https://apnews.com/article/federal-reserve-rate-cuts-inflation-spending-b85c813418a1d00cfcf0391e9441ce02

Most brewers enjoyed the countless new proprietary varieties released over the past decade. Many didn’t mind paying premium prices because they were told they were supporting a farmer. Due to their lack of perspective on hop industry politics they missed that benefitting brewers was never the reason for creating proprietary hop varieties. The surplus has pulled back the curtain revealing what was really going on. There will be more new proprietary varieties if that’s what brewers want, but not because they want them. It will come at the expense of independent merchants and farmers who didn’t want to take orders from a central planning committee, and those who could have become a threat. They will be targeted for elimination. The cartel that gained control of the hop industry has the chance to tighten its grip. Monopolies stifle competition, raise prices to consumers and reduce innovation[1][2][3].  Brewers would be smart to support the survival of independent hop merchants and farmers. Competition encourages higher quality, greater selection and more innovation[4]. If you care about supporting independent farmers and merchants, there’s a simple solution.

THINGS ARE NOT WHAT THEY SEEM

The rapid growth of hop demand between 2012 and 2022 created a false sense of security among farmers and the merchants that don’t own the most popular proprietary varieties. They believed they were accepted into the inner sanctum because they were allowed to grow, sell or brew with those varieties. Some still don’t understand how they are sowing the seeds of their own demise by promoting their competitors’ varieties.

They should ask themselves the following question, “In the long-term, why does a bigger merchant company with global reach need a smaller company to help them do a job they themselves can do?”

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FREE HOPS

Until 2012, hop price spikes and the production deficits that caused them were short-lived. Surpluses, on the other hand, lasted for years[5]. Spot prices are more sensitive to supply changes[6]. Double digit craft beer growth in the U.S. combined with a preference for American proprietary varieties enabled a cartel to manage supply and price. Using their power, they created the perception of a deficit that lasted over a decade. That enabled them to charge premium prices year after year, which affected the global market (Figure 1) [7].

Figure 1. Hallertau spot vs contract prices 1997-2023

Source: HopSteiner Guidelines for Hop Buying 2023[8]

Following a decade-long boom, American merchant/farmers were lulled into a false sense of security by a perpetual seller’s market. Once the growing surplus could no longer be denied, however, the merchants who helped cause it through aggressive forward contracting acknowledged its existence[9]. As the old saying goes, “What goes up must come down”. The surplus has forced prices downward (Figures 2, 3 & 4)[10].

Figure 2. Brewers Supply Group (BSG) Hop Sale announcement

Source: Instagram post from February 12, 2024 on @craftbeerbrew

Figure 3. BSG Hop Sale price details[11]

Source: Brewers Supply Group web site[12]

Figure 4. 75-year trend of USDA season average hop prices adjusted for inflation

Source: USDA NASS

Figures 2 and 3 represent the spot price reaction. Figure 4 is a mix of spot and contract prices across all varieties. For that reason, it is much less volatile and hides the most extreme price changes. Based on the prices above and the limited market activity, I believe spot prices have not yet found the bottom. Prior to the harvest, hops will head to the landfill to make space for the incoming 90-95 million pounds (40.8 – 43.1 MT.) in the U.S. from the 2024 crop.

BREWER PRO TIP: There are a lot of high alpha dual-purpose varieties available today. They’re older, but older hops are not worthless. Hauling hops to the landfill is not free. There may be opportunities for brewers looking for cheap bittering to source hops for the cost of shipping alone before they are discarded.

“If you’re going through hell, keep going.”

-       Source unknown[13]

In German, the term for spot hops is freihopfen[14]. That translates in English to “free hops” in English. Hops going to the landfill is bad. Don’t worry. It’s not as bad as it sounds for the companies selling them. Inventory related losses can result in a refund of previously paid taxes or an offset of future tax liability for those companies. In layman’s terms, that means they may be able to recover what they paid for those hops in the form of fewer taxes paid. They lose their anticipated profits from the quantity they had to dump, but that’s not as bad as losing the entire investment.

BREWER PRO TIP:

In the American culture, bargaining is not as common as it is around the world. That doesn’t mean it doesn’t work. It doesn’t matter if the hops are fresh or old, brewers should bargain with the person selling them their hops. Between farmers and merchants there’s always a lot of haggling to reach a price. When I was a merchant, I was surprised by how few brewers sent back counteroffers. That resulted in some ridiculous pricing. Some brewers believe if they probe multiple merchants they can discover what the going prices are for the hops they need. When the answers come back close to one another, they believe that means that is what those hops cost. Tacit collusion in the industry enables every seller to offer similar prices regardless of their costs. If you want to understand how hop prices work, I explained it in my September 2022 article, “Who Sets Hop Prices … and How?” In a buyer’s market like 2024, it makes no sense for a buyer not to bargain.

… and now back to our regularly scheduled program:  The big lie given today’s surplus is bankers agreeing to maintain the book value of aging inventory. Hop contracts are vital for the hop industry, but not for the reason brewers have been told. For more on that, read my August 2022 article called, “The Con in Hop Contracts”.  This happens quietly behind the scenes to avoid triggering a mark to market event that would revalue existing inventory[15].

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DIVISION

Now that craft beer has matured[16] and demand has declined[17], adding more proprietary varieties increases market division in a shrinking market. The Hop Breeding Company (HBC) brand loyalty will be difficult for its competitors to overcome … in part because they contributed to its strength[18]. The HBC global network effect via the companies with whom it shares common ownership (i.e., John I. Haas[19] and Yakima Chief Hops™[20][21]) gives the brand a powerful first mover advantage. It appears that’s not enough. Their aggressive tactics, some of which were shared with me by their competitors, appear designed to eliminate any and all from the market. They have the power to do that, but they need the brewers help.

Greater market division weakens the collective power of independent farmers and merchants trying to survive. It complicates their job by increasing the number of products they must offer. A significant number of American craft brewers … let’s say the smallest 9,500 … don’t have time to shop around with every merchant looking for somebody to take care of them. Buying hops is one of many jobs they have. The big merchants that control most of the world’s proprietary varieties know this. They leverage the value of their brands to sell both proprietary and public varieties. Farmers and merchants without access to proprietary varieties cannot compete for proprietary business. That creates a competitive disadvantage. It’s not hard to imagine 20-30% fewer hop farmers in the Pacific Northwest (PNW) by 2030. The independents will fight on searching for competitive advantages while hoping their neighbors walk away first.

New proprietary hop varieties are seldom successful. Some great varieties enjoy limited success, but don’t meet the criteria for independent reporting by the USDA.  Belma® is a good example[22]. Those hops end up in the “other” category. One example of this is Warrior® YCR 5. Prior to its release, the hype surrounding the variety was huge. Its owners claimed it was the 20/20 hop and would forever change the industry. History has proven that false, but it sold a lot of hops in the early years. Warrior® YCR 5 even vanished from the statistics between 2015 and 2019, at which time it was included in the other category. In 2023, there were 148 acres (59.91 ha.) of Warrior® YCR 5 in the U.S. (Figure 5).

Figure 5. U.S. Warrior® YCR 5 Acreage 2001-2023

Source: USDA NASS National Hop Reports 2001-2023

In 2023, the USDA released the acreage statistics for Hopsteiner’s Helios™ for the first time. At 1,509 acres (610.93 ha.), 2023 acreage resembles the first year of public data for the Warrior ® YCR 5 variety. Once again, the hype surrounding this variety is huge. As Warrior® YCR 5 acreage demonstrated, early brewer adoption is no indication of long-term success. Time will tell.

More proprietary varieties will bring increased market segmentation. For example, Helios™ is not available on the John I. Haas or YCH websites[23][24]. Another new variety, YQH 1320, also known as Elani™ Brand (YQH- 1320 cv.) was released in 2022.  It’s a good example of a small merchant searching for a foothold in the market resulting in further market segmentation. In 2023, there were 61 acres (24.69 ha.) in Washington State and eight (3.23 ha.) acres in Idaho[25]. Based on its availability, it appears YQH has a distribution deal with John I. Haas[26][27]. It is also available through BSG[28] and the Hop Alliance[29]. As of April 30, 2024, it was not available on the Yakima Chief Hops™ or Hopsteiner web sites[30][31].

FUN FACT:

The address of the Yakima office for Yakima Chief Hops™ (YCH) is on DIVISION street. Of course, that’s a fun coincidence. They didn’t name the street. YCH is only the most recent hop merchant to call that address home. There is a good chance they will not be the last. Or … maybe it’s evidence we’re living in a simulation?

NUMBERS GAME

Charles Faram posted a statistic on their Instagram page in April 2024 that quantifies the scope of the proprietary variety situation for people who were not already aware (Figure 6).

Figure 6. Charles Faram Instagram post

Source: Instagram

What the post does not mention is that there are hundreds of thousands of potential hop varieties during the early stages of development. Most will be eliminated during the 10–15-year evaluation process[32][33][34][35]. According to Jason Perrault of Yakima Chief Ranches, hop breeding is a numbers game where fewer than 0.001% of the results show commercial potential[36].

In 1997, the last year before the USDA reported any proprietary varieties there were 13 hop varieties in production in the U.S. By 2023, that number had tripled. There were 39 that met the USDA criteria for individual reporting[37]. The trend implies that brewers are comfortable with Big Hop (i.e., a term I coined to describe the corporate ownership of the world’s hop supply).

The insatiable demand by craft brewers for proprietary varieties has led merchant/farmers to believe they must develop proprietary varieties to survive. They’re just following the money. By my count, there are at least 12 groups developing or managing new varieties in the U.S.[38]. That is significant in an industry, which in 2023 had 69 farmers[39]. Americans are not the only ones using proprietary varieties to fight for their survival. Similar programs exist in Germany[40], Slovenia[41], England[42], the Czech Republic[43], France[44], New Zealand[45], Australia[46], South Africa[47], Poland[48], Argentina[49], and Brazil[50] to name a few. That is a staggering amount of hop breeding!

DELAYED REACTION

Increased use of ultra-processed hop products reduce the need for hops due to their increased efficiency. The math is simple, but these create a challenge. I explained how varieties with increased alpha production flooded the market sending prices plummeting between 1980 and 2004 in my April 11, 2024 article, “Will Craft Beer Bring the Hopocolapyse?”. In theory, it would have been easy for farmers to correct for increased alpha efficiency by producing fewer acres in the 1980s, 1990s and 2000s. The increased alpha yield could have been easily calculated. In a free hop market, during a surplus, the decision to decrease production is delayed ensuring an extended period of overproduction[51][52].

Source: The New Yorker magazine cartoon online from May 2, 2024[53].

GAME FACE

Disrupting the industry with new proprietary varieties and advanced downstream products creates a Hobbesian Trap[54]. You might be more familiar with The Hobbesian trap stated this way: “They’re doing it, so we have to”, or “If we don’t do it, they will.” This has been the reasoning behind the development of nuclear weapons, the creation of deadly viruses through gain of function research and advances with artificial intelligence[55][56][57][58][59][60][61]. Proprietary varieties encourage brewer loyalty. Loyalty brings incredible value. Once one company headed down that path, the others had no choice (Figure 7).

Figure 7: Hop breeding program game theory chart.

This is the hop version of the prisoner’s dilemma[62]. The best option for the industry collectively would have been to remain in square 1. All players were equal. The market was not always good, but it was predictable. The lack of trust among the players made the move to proprietary varieties inevitable.

In squares 2 and 3, the HBC created a competitive advantage for itself[63]. The industry is on its way to square 4. Due to the number of players that will take some time. Creating and selling proprietary varieties is the perceived pathway to success. Case in point … On May 7, 2024, The Michigan Hop Alliance announced the availability of the second proprietary variety developed by the West Coast Hop Breeding on LinkedIn (Figure X).

Figure 8. Michigan Hop Alliance LinkedIn post.

Source: Michigan Hop Alliance LinkedIn page.

CONNECTION IS PROTECTION

If you haven’t heard of West Coast Hop Breeding, it’s a group of Oregon farmers who according to their web page exist “to ensure that Oregon hop growers have a sustainable future by developing varieties that thrive in Oregon’s unique soil and climate growing conditions”[64].

https://wchops.com

Not every merchant/farmer can afford a breeding program. The high failure rate combined with sporadic success makes them expensive. Alliances like West Coast Hop Breeding combat the HBC’s competitive advantage. Independent merchant/farmers that cannot afford their own breeding programs will move toward similar alliances hoping to develop a Unique Selling Proposition (USP).

Creating more proprietary varieties, however, won’t sustain the number of independent merchant/farmers that want to remain in business. There will be fewer independent merchant/farmers in five years.

Greater balance between proprietary and public variety usage would reduce the cartel’s power, provide opportunity to independent merchants and farmers and encourage competition-based pricing. It’s possible to put the genie back in the bottle. It’s a simple solution, but it is not easy. The industry is not headed that direction. The surplus today is a result of the overproduction of proprietary varieties. Nevertheless, following the acreage decreases of 2022 and 2023, proprietary acreage increased to record levels, 70.45% of American production in 2023[65][66][67]. I believe that trend will continue in 2024 (more on that in June).

If you’re made it this far in the article, thank you for reading! I hope you enjoy the perspectives you find here and find them valuable. If so, please consider subscribing or if you have already, maybe you can share it with somebody else who might find some value in it.

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Proprietary hop variety development resembles the arms race between the U.S. and the U.S.S.R. It’s out of control[68]. The Cold War competition peaked in 1986 with 70,300 nuclear weapons worldwide[69][70]. They would still exist if it weren’t for a 1983 film called “The Day After”. An estimated 100 million Americans, including President Reagan, watched the movie, which depicted a nuclear holocaust in Kansas[71].

The President vowed such a thing would not happen on his watch. That changed the course of history[72]. Today there are 13,080 nuclear warheads, 130 times the amount necessary to make the Earth uninhabitable[73][74].

How many proprietary hop varieties are necessary before the hop industry reaches its “Day After” moment? 400? … 600? … 800? Cash cows like Citra® HBC 394 or Mosaic ®, HBC 369 rarely come along (Figure 9).

Figure 9. Proprietary hop varieties listed by the USDA, their release dates and 2023 acreage.

Source: 2023 USDA National Hop Report. Various sources for release date information[75][76][77][78][79][80][81][82][83][84][85][86][87][88][89][90][91][92][93][94].

*Patent filing date[95].

Between successes, countless varieties will enter the market. Breeding programs will soon notice the diminishing marginal return of each new variety they create. Well-financed private programs will use their war chest to continue beyond this point. Smaller programs will not be able to continue. There is no industry voice of reason to apply the brakes to runaway hop variety development. So long as breweries continue supporting proprietary varieties, companies will compete for hop supremacy.

Source: From the closing scene of the 1983 movie War Games

When the Brewers Association announced that beer production declined in 2023, it signaled the end of an era[96]. New varieties thrived during the craft boom because they helped capture part of a growing market. Today, proprietary varieties are a life preserver for those hoping to grab a bit of a shrinking market because in today’s market they is no other choice.

Based on their acreage, brewers seem to lack interest in new public varieties. That’s a mistake. Public varieties can restore a balance of power not possible in a proprietary world. Why should a brewer care about that so long as they can get the varieties they want? In a proprietary world, brewers will their hops from a handful of companies for premium prices that are never enough and increase every year. What chance for survival does an independent merchant or farmer with no USP have under the status quo?

Public varieties, on the other hand, support free market competition. I’ve only talked to one brewery purchasing agent who said he didn’t care if he was paying too much. He doesn’t work at the brewery anymore. Supporting public varieties supports independent merchants and farmers worldwide.

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[1] https://www.nytimes.com/2024/05/03/technology/google-apple-amazon-meta-antitrust.html

[2] https://www.nytimes.com/2023/09/26/technology/amazon-ftc-lawsuit-antitrust.html

[3] https://hbr.org/2018/03/is-lack-of-competition-strangling-the-u-s-economy

[4] https://www.whitehouse.gov/cea/written-materials/2021/07/09/the-importance-of-competition-for-the-american-economy/

[5] https://www.brewersassociation.org/insights/hop-acreage-report/

[6] https://agriculture.ec.europa.eu/document/download/87ab6ec3-60fc-45b9-840a-70e6eed56469_en?filename=ext-eval-products-markets-final-report_2010_en.pdf

[7] https://www.deutscher-hopfen.de/HRI_2023_2024/S%20003_Editorial_HRI%2023-24_low.pdf

[8] https://www.hopsteiner.com/news/2023/11/guidelines-for-hop-buying-2023/

[9] https://brewingindustryguide.com/rightsizing-the-hop-market/

[10]https://go.bsgcraft.com/sale/?utm_source=craft+beer+brewing&utm_medium=digital&utm_campaign=hop+liquidation+cb&b+sponsored&utm_content=hops

[11] This is just a portion of the varieties available at these prices. More details were available at the link cited.

[12] https://go.bsgcraft.com/rs/566-YJV-184/images/BSG_HopSale_chart.pdf?version=0

[13] Falsely attributed to Winston Churchill according to the International Churchill Society: https://winstonchurchill.org/resources/quotes/quotes-falsely-attributed/

[14] https://www.lfl.bayern.de/mam/cms07/ipz/dateien/hopfen_Ökonomik_nachhaltigkeit.pdf

[15] https://corporatefinanceinstitute.com/resources/valuation/mark-to-market/

[16] https://www.brewbound.com/news/bart-watson-craft-market-isnt-maturing-it-has-matured/

[17] https://www.news5cleveland.com/craft-beer-production-has-declined-in-the-us-new-report-shows

[18] https://corporatefinanceinstitute.com/resources/management/first-mover-advantage/

[19]

https://www.hopbreeding.com

[20] https://www.yakimachief.com/our-company

[21] https://yakimachiefranches.com/history/

[22] https://hopsdirect.com/products/belma-leaf

[23] https://www.johnihaas.com/products/hops/

[24] https://www.yakimachief.com/commercial/hop-varieties.html?p=2

[25]https://www.nass.usda.gov/Statistics_by_State/Regional_Office/Northwest/includes/Publications/Hops/2023/hops1223.pdf

[26] https://www.johnihaas.com/products/hops/

[27] https://yakimavalleyhops.com/products/elani-hops

[28] https://bsgcraftbrewing.com/american-hops/

[29] https://hopalliance.com/products/elani-hop-pellets-2023?variant=40348072280198

[30] https://www.yakimachief.com/commercial/hop-varieties.html?product_list_limit=all

[31] https://www.hopsteiner.com/variety-data-sheets/

[32] https://www.goodbeerhunting.com/blog/2020/2/12/breeding-in-captivity-how-genetic-sequencing-is-changing-beers-main-ingredients

[33] https://yakimachiefranches.com/create/breeding/

[34] https://www.homebrewersassociation.org/how-to-brew/hbc-438-new-hop-variety-just-for-homebrewers/

[35] https://agsci.oregonstate.edu/hop-breeding/research-hop-breeding-and-genetics

[36] https://www.outsideonline.com/food/hops-craft-beer-popularity-future/

[37]https://www.nass.usda.gov/Statistics_by_State/Regional_Office/Northwest/includes/Publications/Hops/2023/hops1223.pdf

[38] My apologies if I missed anybody. There may be more. There are at least 12 groups.

[39] https://www.barthhaas.com/resources/barthhaas-report

[40] https://www.hvg-germany.de/en/

[41] https://www.ihps.si/en/hop-growing/hop-breeding/

[42] https://www.britishhops.org.uk/hop-breeding-2/

[43] https://www.chizatec.cz/en/

[44] https://www.beer-analytics.com/hops/dual-purpose/mistral/

[45] https://nzhops.co.nz/pages/innovation

[46] https://www.hops.com.au/hop-breeding-program/

[47]

https://zahops.com/#za-hops-descriptions

[48] https://polishhops.com/hop-breeding-programme/

[49] https://brauwelt.com/en/topics/raw-materials/642156-local-hop-varieties-from-patagonia#:~:text=Argentinian%20hops%20%7C%20In%20the%201980s,environment%20and%20obtaining%20better%20yields.

[50] https://www.sciencedirect.com/science/article/abs/pii/S1161030123002587

[51] https://web.archive.org/web/20220823014223id_/https://www.agriculturejournals.cz/publicFiles/156_2022-AGRICECON.pdf

[52] https://agriculture.ec.europa.eu/document/download/87ab6ec3-60fc-45b9-840a-70e6eed56469_en?filename=ext-eval-products-markets-final-report_2010_en.pdf

[53] https://www.newyorker.com/cartoons/daily-cartoon/thursday-may-2nd-technology-potential?utm_social-type=owned&utm_source=linkedin&utm_brand=tny&utm_medium=social

[54] https://www.kellogg.northwestern.edu/faculty/baliga/htm/hobbesiantrap.pdf

[55] https://static.googleusercontent.com/media/research.google.com/en//pubs/archive/46290.pdf

[56] https://www.congress.gov/117/meeting/house/114270/documents/HHRG-117-GO24-20211201-SD004.pdf

[57] https://www.cnn.com/2024/03/09/politics/us-prepared-rigorously-potential-russian-nuclear-strike-ukraine/index.html

[58] https://theintercept.com/2021/09/09/covid-origins-gain-of-function-research/

[59] https://www.reuters.com/world/nukes-space-what-have-russia-united-states-said-2024-02-21/

[60] https://www.state.gov/report-on-the-status-of-tactical-nonstrategic-nuclear-weapons-negotiations/

[61] https://www.forbes.com/sites/steveforbes/2023/03/30/laboratories-are-still-performing-gain-of-function-research-on-viruses-more-dangerous-than-covid-19/?sh=27d4bf722259

[62] https://www.kellogg.northwestern.edu/faculty/baliga/htm/hobbesiantrap.pdf

[63] This is an oversimplified example of the real situation in the hop industry in which there are today at least 11 variety development programs.

[64]

https://wchops.com

[65] https://brewingindustryguide.com/the-next-hop-market-correction/

[66] This does not count any proprietary varieties that are included in the “other” or “experimental” category. The true percentage of proprietary varieties produced in the U.S. is higher.

[67]https://www.nass.usda.gov/Statistics_by_State/Regional_Office/Northwest/includes/Publications/Hops/2023/hops1223.pdf

[68] https://www.amazon.com/Nuclear-War-Scenario-Annie-Jacobsen/dp/0593476093/ref=sr_1_1?dib=eyJ2IjoiMSJ9.btPtnXTnYHlwft9pjcT5zGPQpUqY-9DdbydH1e2mao4MJ21BZnf7bXQPrsUA4RHSq7r7Ac1-497gzvTG46lje0INMt4ewxetRRu5zrSvCUZnLtGFXM_hrX85dq1MgWwLxQIyBAAzroX6HhTwXZq2uOft8gyV7TVXlJw5zk0H4b1x1awdt2U-hkP8NuPQqQbfWZFtf2_Dhn3FxnWfK78Ov1bzlHlbrX6pG20R38clFV8.s7pHtxxfTaOWYCpBN6GtM4W_0DbK0oR6dzRh-InXMnM&dib_tag=se&keywords=Annie+Jacobsen+nuclear+war&qid=1715154194&sr=8-1

[69] https://responsiblestatecraft.org/2023/08/02/oppenheimer-and-the-birth-of-the-nuclear-industrial-complex/

[70] https://fas.org/initiative/status-world-nuclear-forces/

[71] https://www.imdb.com/title/tt0085404/

[72] https://time.com/6337667/day-after-tomorrow-cold-war-essay/

[73] https://www.chathamhouse.org/2023/06/nuclear-governance-model-wont-work-ai

[74] https://worldpopulationreview.com/country-rankings/nuclear-weapons-by-country

[75] https://www.barthhaas.com/hops-and-products/hops/amarillor-vgxp01-cv

[76] https://www.hopslist.com/hops/bittering-hops/apollo/

[77] https://www.geterbrewed.com/azacca-t90-hop-pellets-usa/

[78] https://brewculture.com/products/el-dorado®-cryo-hops®

[79] https://dcbeer.com/2016/11/26/hop-harvest-qa-with-hopsteiner/

[80] https://hopheadfarms.com/hops/idaho-7-hops/#:~:text=If%20so%2C%20you've%20likely,since%20its%20release%20in%202015.

[81] https://beermaverick.com/hop/bravo/

[82] https://www.stonebrewing.com/beer/special-releases/stone-loral-dr-rudis-inevitable-adventure-double-ipa#:~:text=Loral%20hops%20were%20released%20in,of%20our%20brewers'%20favorite%20varieties.

[83]

https://www.hopbreeding.com

[84] https://brulosophy.com/2020/01/02/the-hop-chronicles-ctz-2018/

[85] https://yakimavalleyhops.com/products/ekuanot-hop-pellets

[86] https://www.brewersjournal.ca/2020/08/25/hop-breeding-company-announces-commercial-release-of-talus-brand-hbc-692-hop-variety/

[87] https://www.linkedin.com/posts/hopsteinerhops_the-history-of-helios-since-2006-activity-7167564734462935040-4Puq/

[88] https://beermaverick.com/hop/strata/

[89] https://patents.justia.com/patent/20170127588

[90] https://www.twobeerdudes.com/hops/profile/146/super_galena

[91] https://yakimavalleyhops.com/products/sabro-hop-pellets

[92] https://yakimavalleyhops.com/products/simcoe-hop-pellets

[93] https://patentimages.storage.googleapis.com/24/89/53/7bcb5adf486912/USPP15663.pdf

[94] https://www.beer-analytics.com/hops/bittering/warrior/#:~:text=Warrior%20hops%20are%20a%20unique,among%20commercial%20and%20homebrewers%20alike.

[95] No release date is publicly available online. The patent filing date is the most reliable date associated with the release of the variety. https://patentimages.storage.googleapis.com/f3/1c/05/283598704477f5/USPP27779.pdf

[96] https://www.brewersassociation.org/statistics-and-data/national-beer-stats/

In this edition of the MacKinnon Report, I talk about sustainability in the hop industry and the solution to making the hop industry more environmentally friendly.  See “Earth Day” below.

I expand on a LinkedIn post I made a few weeks ago in which I listed six myths about hops. So, this is six-in-one article. See “Six Myths” below.

I discussed the news from the Brewers Association about declining U.S. beer production and the impact it will have on the hop industry. See “Shrinkage” below.

I hope you’ll enjoy reading this edition of the MacKinnon Report as much as I enjoyed writing it. If you haven’t already subscribed, I hope you’ll consider it today.

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EARTH DAY

In honor of Earth Day this week, I thought I’d write a bit about sustainability and hops. Sustainability is a wonderful goal. Wouldn’t the world be wonderful if we were all satisfied living a minimalist lifestyle living off the land while reusing and recycling products? Today’s sustainability movement doesn’t encourage that. It encourages us to continue our conspicuous consumption but in certain ways that are perceived to be better for the planet, but are they?

Since 2012, American merchant/farmers flexed their sustainability to portray an environmentally friendly image while at the same time doubling the natural resources they consumed. In my December 2022 article “Hops are green … But are they sustainable?”, I wrote about the environmentally friendliness of hops.

Since the industry switched to drip irrigation en masse, the methods for producing and harvesting have not changed much. Around the world, hops are dried using massive amounts of fossil fuels^{[1][2][3][4][5]}. Hops are stored in massive cold storage warehouses year-round at temperatures near freezing^[6]. According to Hop Growers of America, in 2023 alone 17,055 metric tons (37.6 million pounds) of American hops were shipped to customers around globe^[7][8]. These processed can become more efficient over the past decade, but they have not changed.

To lend money, banks require borrowers meet ESG guidelines^[9]. The World Economic Forum claims customers prefer to buy from companies with which their interests align^[10]. Even Greenpeace says that “net zero” is a scam designed by elites for profit^[11][12][13]. If you’re interested in the subject, you might find “Climate The Movie” worth watching. It was released in March and is available for free on YouTube and presents information many people may not have heard from many credible sources.

Whether it’s all a scam or not, saving the planet has created opportunities to influence customer perception^[14]. Of course, the system has been abused. Companies highlighting little or no changes while touting their environmentally friendliness and sustainability is greenwashing or bluewashing^[15][16].  Consumers are starting to recognize vague and exaggerated claims of sustainability for what they are^[17]. Lawsuits confronting corporate greenwashing are on the rise^[18][19]. In Australia, in March, Vanguard was found guilty of greenwashing^[20]. Statements the company made regarding an “ethically conscious” investment fund were found to be potentially misleading to investors^[21]. Investment companies are often fiduciaries, which are held to a higher standard than other companies. Shouldn’t all companies strive to be transparent and honest^[22]?

Snow across parts of Europe on April 22, 2024 … Earth Day.

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One problem that cannot be avoided is that every aspect of the hop business consumes significant natural resources. But some say there may be hope on the horizon. John I. Haas claims its new varieties will be more environmentally friendly^[23]. Hopsteiner says the same … but about their varieties^[24][25]. They make convincing arguments. Both suggest inputs like fertilizers, pesticides and water consumption relative to yield are the way to measure environmental friendliness and sustainability. Although they seem to agree on that, their analyses favored their own company’s proprietary varieties over their competitor’s^[26][27]. Yakima Chief Hops™ does not seem to take this approach^[28]. However, if you read the Hopwire Blog, you might be forgiven for thinking the company’s raison d'être is to save the planet^[29][30][31].

No objective way exists to determine how one variety or company might be more sustainable than another. I doubt something as simple as that is possible due to industry politics. Organizations like Hop Growers of America (HGA) or the International Hop Growers Convention (IHGC)^[32], which are presumed to be neutral are controlled behind the scenes by powerful companies with financial interests in selling their own proprietary products. An objective sustainability standard would favor one variety (i.e., one company) over another. That cannot be allowed. The stakes are high. In January, Hop Growers of America published the list of the ten most widely planted varieties in the Pacific Northwest (PNW). Seven out of the ten were proprietary (Figure 1). A power hierarchy with a culture of intimidation and retribution permeates every facet of the industry. That keeps objective truths like sustainability from seeing daylight. The result is the environment is reduced to a way to sell more hops.

Figure 1. Yields of the Ten Most Widely Planted Varieties by Acreage in the U.S. 2018-2023.

Source: Hop Growers of America 2024 Statistical Report^[33]

Since the big merchants agree yield is a valuable metric to analyze environmental impact, let’s explore that further. In 2023, the average yield for hops produced in the PNW was 1,915 pounds per acre (2.145 mt/ha). Seven out of the top 10 varieties had yields that were below the average (Table 1).

Table 1. Average variety yield for the 10 most widely planted hop varieties in the PNW relative to the average yield for all varieties produced in the PNW in 2023.

Source: USDA NASS 2023 National Hop Report

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Sustainable Hop Solutions

If we’re honest, there is only one solution to significantly reduce the harmful impact of the hop industry on the environment … use fewer hops. There are two ways brewers can do that.

1)    Breweries can use fewer hops by using more efficient brewing methods. The craft revolution was great for hop sales. The money available and the race for market share encouraged brewers to use inefficient brewing methods, like dry hopping, to get the flavors they sought. The inefficiencies of cost impact of dry hopping are explained by brewer and podcaster Chris Lewington in this LinkedIn post.

2)    Breweries can incorporate extracts or downstream products into the mix. If they figure out the products they need to get the flavors they want, downstream products would create less of an environment impact while producing the same amount of beer. Companies like Totally Natural Solutions, HopXL, or Abstrax exist for that purpose.

There are several other companies in the downstream product space too. They’re not hard to find. Big merchants also offer downstream products that address this issue^[34][35][36].

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SHRINKAGE

According to the Brewers Association, the US craft industry contracted 1% in 2023 and the total beer market shrunk by 5.1%^[37][38]. Competition has intensified^[39]. Fortunately, the selection of high quality Non Alcoholic (NA) beers has grown. That will keep consumers concerned about the negative health effects associated with alcohol from leaving the market.

As the only significant source of money for the hop industry, that means a shrinking hop market. Today’s market has a massive surplus^[40]. There are rising costs of production due to inflation^[41]. There is the controlled reduction of proprietary variety acreage.^[42] Finally, there are large hop farms with access to resources that do not want to become small hop farms. The conditions are ripe for the industry to implode due to infighting. It represents a bonanza of opportunity for brewers once they work through existing inventories.

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SIX MYTHS

This article comes from a LinkedIn post I made earlier in April (see below)

Myth #1: The hops you select in Yakima are the hops you get.

Brewers believe when they visit their favorite merchant in Yakima during harvest and select hops that they get the hops they selected. That’s not always true. The idea that the hops you will get are exactly like the hops you selected in Yakima. It depends on a couple things.

1. It depends on the quantity of hops you’re buying.

a.     Big breweries spend more money. Merchants ensure they get the best product.

b.     If you’re not buying a large quantity of hops, let’s say 30,000 pounds (13.6 mt), the hops you sniffed could be mixed with hops from other lots during the pelleting process. The big merchants process a lot of hops in a short amount of time. The mixers can be large. This is to create large uniform batches of hops instead of lots with different characteristics^[43]. This is why there are group and solo selections^[44].

2. Regardless of the quantity, a sample from one or two bales does not represent an entire lot of hops^[45].

3. Do the characteristics of the hops you smelled in Yakima make their way into the beer^[46]? That’s a complicated process, but merchants do their best to facilitate your recollection of what a brewer experienced during a previous selection.

4. How many hop samples can you sniff before your nose can’t smell anything anymore? That’s called olfactory fatigue or nose blindness^[47][48][49]. It can happen in minutes and there’s no way to prevent it^[50]. I doubt merchants will tell you about nose blindness during the sampling process. Good news though … Drinking a moderate amount of beer while selecting hops enhances the olfactory senses^[51].

If you’re not buying multiple pallets of each variety you need, manage your expectations regarding selection. Realize, that for most brewers, selection is a promotional/marketing expense for the merchant. That said, it’s a fun experience and a good chance to learn about hops and meet the people involved in the industry^[52]. The scale and pace of the American hop harvest is a unique and impressive experience.

If you consider it entertainment, you won’t be disappointed. Brewers should make the trip while the industry is still at its peak. The industry will be changing soon.

QUESTION EVERYTHING: 

If you’re a brewer showing up in Yakima for selection, what are you selecting? Where you are in the pecking order?  If 1,000 brewers selected hops before you, are you getting the best hops … or just the best from what’s left? How do you know when to visit to get the best selection? Does timing matter? Is the amount you spend important? Does your relationship with the seller make a difference? Is it worth the expense?

Myth #2: The U.S. has an effective public breeding program.

American public breeding programs produce varieties, which during any other time in hop history would have been well received. The plant breeders at work have the technical skills to create useful varieties with desirable flavors. In that way, it is more effective than ever. The quality of the varieties they produce is not in question. The issue is who will sell those varieties?

“If a tree falls in a forest, and no one is around to hear it, does it make a sound?”

-       Charles Riborg Mann, George Ransom Twiss, "Physics" (1910), p. 235.^[53]

In 2017, the Brewers Association (BA) gave the U.S. hop industry $1 million in 2017 to “create …”^[54]. This was a nice symbolic move, but naïve on their part. It demonstrated their complete lack of understanding how hops are sold. It reminded me of the 1989 movie Field of Dreams when a spooky voice says to Kevin Costner, “if you build it, he will come” meaning he should build a baseball diamond in the middle of his corn field.

Of course, that’s Hollywood so when he built the field the players came. One of the players was his father. They play catch at the end of the movie in a scene that will make you cry (watch it at your own risk)^[55].

The idea that new public hop varieties will succeed because somebody created them is a dream. Again … follow the money. Today, public varieties compete not on their merits alone, but against proprietary varieties that generate royalties that create a financial buffer and a competitive advantage for their owners. Put differently, some merchants have fewer financial incentives to sell public varieties.

Farmers who receive those royalties from their proprietary varieties will outlast the ones that simply grow them. The more popular the proprietary variety … the bigger the buffer and the competitive advantage. According to the National Bureau of Economic Research, royalties are a deadweight loss causing the cost (of hop varieties in this case) to exceed their real value^[56][57]. Royalties on hop varieties, therefore, are a sign of the market’s inefficiency and irrationality.

Presumably, merchants will claim they act fairly because they offer public varieties for sale and it’s up to the brewer which hops he wants. Brewers have no way to navigate the minefield of half-truths merchants and farmers tell them, of which this is one. In truth, there is no merchant who promotes public varieties when they can promote proprietary varieties they own. If you don’t believe that, try this simple experiment, but prepare to be shocked. Visit the Instagram accounts for Yakima Chief Hops™, John I. Haas® and Hopsteiner. Looks at their posts for the last few months. See how many times they promoted proprietary versus public products. You’ll notice a strong bias in favor of proprietary products. Industry groups would be the ones to do promote public varieties, but they were coopted by powerful forces working behind the scenes to achieve their goals long ago.

“A half-truth is a whole lie.”

-       Yiddish Proverb^[58]

A similar thing happens to breweries with distributors under the three-tier system. The three-tier system favors large breweries^[59]. A small brewery may list their beer with a distributor. That does not mean that the distributor tries to sell their beers. It means it’s available on their list of beers they can provide. Independent craft brewers must often market their product to customers themselves.

Their strategy takes advantage of 10 powerful cognitive biases marketers use to increase sales^[60][61][62].

Myth #3: It’s best to buy the freshest hops because older hops are lower quality.

This is the perception. This doesn’t apply to crop year 2022 hops. Three- or four-year-old pellets can deliver the same performance as fresh crop at half the price in a surplus year like 2024. Extracts have an even longer shelf life.

PRO TIP:

In general, fresh hops are better than older. When that change becomes noticeable, however, is the question. For craft brewers who don’t already know, it takes a few years before you approach that line. If hops have been pelleted and stored according to industry standards, there won’t be any significant degradation for three or four years … at least. Due to the misperception by the brewing industry, older hops are sold at a discount. Their higher return on investment makes them the best deal in the industry. That does not mean that crops five years or older are worthless either. More on that later.

Most brewers have heard of the Hop Storage Index (HSI). The common belief is that anything under 0.3 is good. As hops age the HSI increases with time. HSI has an inverse relationship with the presence of useful compounds. The higher the number goes (e.g., 0.4 … 0.9) the lower the quality of the hops are perceived to be^[63]. I believe that’s the origin of the myth that older hops are lower quality. That could turn into “old = bad”. The problem with HSI is that it’s a simplistic way to measure hop quality.

Here are a few things wrong with the idea that older hops are of lower quality. This list is not intended to be an exhaustive list:

1. Weather – Rainfall, heat, drought and pests can affect, alpha acid content^[64], essential oil production and yield. The previous year’s crop produced under better circumstances can offer a higher quality than the current crop. If a variety is picked late, that affects the HSI score.

2. Proper Storage -  Proper cold storage of hop products slows the degradation process^[65][66]. Today, cold storage is the norm^[67][68]. How quickly hops will degrade depends on the temperature at which they are stored^[69].

3. Terroir – A variety produced in a different region can affect flavor and performance. If the expectation is for a Washington Cascade flavor, but the Cascades were grown in Germany, the hops will not deliver the flavor of a Washington Cascade^[70]. The same is true between hop production in different U.S. States.

4. Variety difference - Different varieties degrade at different rates. Nugget variety alpha acid remains stable after harvest for months. The CTZ variety, on the other hand, must be processed immediately.

5. Plant Age – Young hop plants have more vigor than an older plant. Their productive life differs by variety.

6. Pellet Age - Hops pellets processed three to five years ago still contain most of their original characteristics … if they have been packaged and stored properly. Part of the problem with the current pesticide regulation changes in the EU is that many breweries still have and had planned to use hops from 2020, 2021 and 2022, which will soon be illegal to use. If hop quality is not preserved, the industry is going to the great expense of flushing mylar foils with nitrogen/CO2 and storing product at near freezing temperatures for no reason.

7. Picking Window – The harvest date affects quality. Every hop variety has an ideal picking window. The window for a field depends on that field’s location and many of the variables included above. If a variety is picked outside that window, the characteristics of those hops change^[71]. Harvesting a variety late can have a positive effect on essential oil content in some varieties^[72]. According to the Brewers Supply Group (BSG), when Amarillo® VGXP001 is harvested late it exhibits onion or garlic flavors^[73]. Eric Desmarais from CLS farms discussed the changes he noticed with El Dorado™ brand hops during the 2023 crop on the Drink Beer, Think Beer podcast. You can listen to that at the link below.

I could go on. The point is that there are so many reasons that older hops are not inferior products. Brewers who already understand this should share this article with their brewer friends who don’t so they can save a little money by buying older hops.

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A new company, HopXL, claims that older hops are no longer useless and HSI can be ignored if the hops are transformed into one of their products. They are exhibiting at the CBC this year for the first time. I have been invited to visit their facilities in San Diego and hope to learn more about their products in the coming months.

Myth #4: Without forward contracts, farmers can’t produce hops.

Contracts are a trojan horse used to funnel hundreds of millions of dollars into the industry. I’ve written about that before in my August 2022 article, The “Con in Hop Contracts”. It is more accurate to say that without contracts farmers won’t overproduce hops. Contracts are marketed as a way for farmers to know what to produce. For that to work, the brewers signing the contracts need to know what they need.

When the industry was dominated by 50 macro breweries who understood the market, supply was easier to manage. Contracts got out of control when the U.S. craft industry went from 900 to 9,000 breweries and the system didn’t change. Why would it change. Again, follow the money! Imagine a growing and changing market made up of thousands of inexperienced brewers none of whom have hop purchasing experience. Now, tell them they must forecast the demand for multiple hop varieties five years in advance. The system was designed to extract maximum value from the brewing industry.

DURESS OR UNDUE INFLUENCE:

Were five-year contracts forced upon small craft breweries signed under economic duress? Did sellers with exclusive access to proprietary varieties exercise undue influence to force long-term contracts upon craft brewers. If so, either could invalidate the contracts. You can read more about economic duress and undue influence here.

The problem is for every 100 bales of hops contracted most farmers plan to produce between 103-105 bales to account for the uncertainty inherent in agriculture. When contracts are plentiful and prices are high, farmers want to deliver in full to get every dollar. They overproduce as a result. When contracts are scarce and prices are low, they must collect every dollar possible. Again, they overproduce. Because hop farmers are good at what they do, seldom do yields dip below average^[74]. There is never an incentive for farmers to underproduce. Those extra hops are never plowed back into the field once they’re baled until years later when it’s clear they won’t sell. That is why, until now, there has never been a hop shortage.

This brings up one of the more challenging situations of hop production. The only way to know how many hops a farmer produced is because he tells you.

FUN FACT:

In 2007-08, one American hop cooperative that no longer exists found itself in a difficult situation. Prior to the 2007 hop harvest, the farmer owners committed their hops to the cooperative at prices that were normal for the time. As 2007 progressed and prices soared, those farmers started noticing. The prices at which they had promised to deliver their hops seemed ridiculous. Market prices were 20 times higher. They began to short their commitments to their own cooperative and began selling outside of the cooperative. The reasons … “the crop was coming in light” … “yields were down”. This was to their own company, which threatened to sue them over the short deliveries. This is the sort of thing attributed to farmers in Central and Eastern Europe. The same thing happened in Central and Eastern Europe in 2007 enraging at least one German hop merchant. This is the reason hop cooperatives eventually fail. They are a wonderful way to collect money when prices are good. They are a guaranteed sales outlet when prices are bad. They do not handle transitions well. Proprietary varieties change the dynamics. Whether the coops of today survive remains to be seen. Will the independent farmers who remain invest millions and expanding acreage of proprietary varieties they do not own when demand increases in the future? European hop farmers have a system to document production on every farm dating back to when subsidies were linked to production unlike they are today[75].

Myth #5: Paying the fair price recommended by the US industry helps support farmers.

Of course making more money is always good. In that way this myth is true. Voluntarily paying much more than a farmer needs to make a reasonable profit support them more than simply paying a reasonable price.

“Pigs get fat, hogs get slaughtered.”

-       Unknown

Brewers that pay premium prices supports hop production. They could be saving money, or getting more hops and still offering their favorite farmers a reasonable profit in the process.

Caveat Emptor!

FUN FACT:

The purchasing agent for a very successful brewery told me, “I don’t mind if we’re paying too much for our hops. We can’t risk ruining our relationships with the merchants we’ve worked so hard to develop.” I am sure his boss, the owner of the successful brewery, would not feel the same. Even if he did, I’m sure he would appreciate paying extra for his hops on his own accord rather than being lied to. I haven’t mentioned it to him … yet.

The reason I place this in the myth category is because American hop farmers inflate the alleged costs of hop production far beyond their actual costs. The implication is that hops cost much more than they do to produce so they need more to break even. The WSU Cost of Hop Production Survey (the “WSU survey”) claimed hops cost $13,588.66 per acre ($33,563.99 per hectare) in 2020. Accounting for the rise in CPI inflation, that number would be $16,399.15 in 2024^[76][77]. Using the five-year average yield for the Pacific Northwest (PNW) states of Washington, Oregon and Idaho was 1,915 pounds per acre^[78] (2.145 mt/ha), American hops will cost $8.56 per pound ($18.88 per kg.) to produce. As farmers there continue to produce over the next year or two as prices fall, these numbers will be revealed for the farce they are.

If you’re interested in exactly how the WSU cost of Hop Production Surveys have been manipulated, please read my September 3, 2022 article “Are you Overpaying for American Hops?”, or my October 15, 2022 article entitled “How Much Do U.S. Hops Really Cost?”.

The poor farmer stereotype is deeply rooted in American culture from the mid-20^th century when every farmer worked his land. There are still a handful of American hop farmers who do, but that is not the norm. The industry manipulates the numbers to anchor price negotiations higher than they would otherwise be. It’s a brilliant strategy. Breweries who don’t know what they don’t know believe what they are told. Earlier this year, I spoke with one such brewer purchasing agent. He worked at one of the ten largest craft breweries and reads these articles. He was confident he knew the true cost of hop production. When I asked how he knew, he cited the WSU survey. He should know better. I have found that most craft brewers are so busy trying to run their breweries and save money that they can’t or don’t invest the time necessary to understand the markets for their ingredients.

Myth #6: Hop Growers of America equally represents all American hop farmers.

The organization, like many of the organizations in the industry, have been hijacked. I visited the Hop Growers of America (HGA) booth when I last attended the Brau. They had samples of varieties available. Most of the hops produced in the U.S. today are proprietary. That was reflected in the varieties available for sampling. The varieties produced on half the U.S. acreage are owned by one company, the Hop Breeding Company (HBC).

American farmers who do not own the HBC or the companies that distribute their varieties, could argue against paying the state assessment funds they are forced to pay, which create a disproportionate advantage for their competitors. Over the years, farmers from several industries have challenged assessments, which were found to be unconstitutional for infringing on their constitutional first amendment rights ^[79][80][81]. Perhaps one of those cases can be used as precedent for what is happening in the U.S. hop industry today.

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^[1] https://piet.ucdavis.edu/sites/g/files/dgvnsk8286/files/inline-files/2019%20-%20RuhstallerHopKiln%20-%20FinalPresentation.pdf

^[2] https://ir.library.oregonstate.edu/downloads/kw52jg829

^[3]https://www.researchgate.net/publication/263817940_Optimization_of_the_Hop_Kilning_Process_to_Improve_Energy_Effi_ciency_and_Recover_Hop_Oils

^[4] https://www.canr.msu.edu/uploads/234/78941/Hop_Track_-_German_Hop_Drying_Technologies_-_Florian_Weingart.pdf

^[5] The 2020 WSU Cost of production survey neglects to mention the usage of fossil fuels in the drying process. They simply list a dollar value for the fuel used without specifying the amount of BTUs or liters of LNG or Propane involved. In checking for this, I have likely stumbled across another way the WSU budget is misleading and inaccurate. The data cannot be checked. We are to accept that the average 600-acre farm used $150,000 worth of fuel of some sort to dry hops. At what price was the natural gas purchased? Were forward contracts used? How can inflation be claimed if there is no baseline against which to compare it? This, in my opinion, is another example of the deception employed by the hop industry against the brewing industry. You can view the omission for yourself on page 4 of the document at the following link:  https://rex.libraries.wsu.edu/esploro/outputs/99900670220101842#file-0

^[6] https://hollingberyandson.com/facilities

^[7] https://www.usahops.org/img/blog_pdf/474.pdf

^[8] At 19 metric tons per 40-foot container, that’s 897 containers of hops that traveling overseas in 2023.

^[9] https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/tech-forward/esg-data-governance-a-growing-imperative-for-banks

^[10] https://www.weforum.org/agenda/2021/12/people-prefer-brands-with-aligned-corporate-purpose-and-values/

^[11] https://www.greenpeace.org/eastasia/blog/7910/shells-scandal-in-china-highlights-the-greenwashing-and-climate-risks-of-carbon-offset-credits/

^[12] https://hbr.org/2022/04/yes-investing-in-esg-pays-off

^[13] https://www.greenpeace.org/international/story/54079/great-carbon-capture-scam/

^[14] https://www.forbes.com/sites/timothyjmcclimon/2022/10/03/bluewashing-joins-greenwashing-as-the-new-corporate-whitewashing/?sh=2f6390c3660c

^[15] https://www.linkedin.com/posts/ych_happy-earth-day-friends-we-are-activity-7188193622343725057-5I3C?utm_source=share&utm_medium=member_desktop

^[16] https://sustainablereview.com/see-through-green-how-to-identify-greenwashing/

^[17] https://news.bloomberglaw.com/bloomberg-law-analysis/analysis-green-product-claims-face-growing-consumer-scrutiny

^[18] https://news.bloomberglaw.com/esg/100-sustainable-claims-pose-mounting-legal-risk-for-companies

^[19] https://www.theguardian.com/environment/2024/apr/05/letitia-james-jbs-meat-lawsuit-greenwashing

^[20] https://www.afr.com/companies/financial-services/vanguard-guilty-of-greenwashing-in-asic-s-first-major-court-win-20240327-p5ffp1

^[21] https://www.gtlaw.com.au/knowledge/asics-first-greenwashing-win-federal-court

^[22] https://www.forbes.com/advisor/investing/financial-advisor/what-is-fiduciary-duty/

^[23] https://www.johnihaas.com/news-views/new-data-shows-incredible-sustainability-of-hbc-experimental-varieties-versus-classic-craft-hops/

^[24] https://www.hopsteiner.com/blog/hop-varieties-with-reduced-carbon-footprint/

^[25] https://brauwelt.com/en/news/hopsteiner/644506-environmental-impact-of-hop-varieties

^[26] https://www.hopsteiner.com/blog/hop-varieties-with-reduced-carbon-footprint/

^[27] https://www.johnihaas.com/news-views/new-data-shows-incredible-sustainability-of-hbc-experimental-varieties-versus-classic-craft-hops/

^[28] Or at least I have not found it yet.

^[29] https://www.yakimachief.com/commercial/hop-wire/climate-change

^[30] https://www.yakimachief.com/commercial/hop-wire/impact-focus-carbon-reduction-blog#:~:text=Invest%20in%20research%20and%20development,greenhouse%20gas%20emissions%20by%2056%25.

^[31] https://www.yakimachief.com/commercial/hop-wire/earth-day-2024

^[32] https://www.ihgc.org/members/

^[33] https://www.usahops.org/img/blog_pdf/474.pdf

^[34] https://www.yakimachief.com/media/wysiwyg/Approved_Distributor_Guide_-_Revised_2.15.22.pdf

^[35] https://www.hopsteiner.com/blog/innovations-for-brewing-and-beyond/

^[36] https://www.johnihaas.com/news-views/the-future-of-dry-hopping-is-liquid/

^[37] https://www.brewersassociation.org/association-news/brewers-association-releases-annual-craft-brewing-industry-production-report-and-top-50-producing-craft-brewing-companies-for-2023/

^[38] https://www.probrewer.com/beverage-industry-news/business-of-beer/ba-releases-craft-beer-production-numbers-for-2023-production-down-1/

^[39] https://www.brewersassociation.org/press-releases/the-2023-year-in-beer/

^[40] https://brewingindustryguide.com/infographic-hops-pullback/

^[41] https://www.agriculture.senate.gov/newsroom/minority-blog/usda-says-high-farm-production-costs-not-easing-in-2024#

^[42] https://brewingindustryguide.com/the-next-hop-market-correction/

^[43] A merchant will always buy an aroma variety, for example Slovenian Aurora, with above average alpha acid (e.g., 10-12%) to blend with Auroras from the same crop year with below average alpha (e.g. 5-7% alpha). This creates a more uniform and consistent product of 9-10% alpha Auroras. If a merchant doesn’t do this, he is left with lots of substandard product once his premium product is sold.

^[44] https://www.morebeer.com/articles/Hop_Selection

^[45] The quality within a lot of hops can vary from bale to bale. Moisture when bales are received represents how variable baled hops can be. It’s necessary to probe some bales in more than one place (center, top and bottom) to get an accurate moisture reading.

^[46] https://www.linkedin.com/pulse/demystifying-art-hop-selection-insiders-perspective-from-thomson/

^[47] https://www.sciencedirect.com/topics/medicine-and-dentistry/olfactory-fatigue

^[48] https://www.healthline.com/health/nose-blindness#how-it-happens

^[49] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3989720/

^[50] https://www.libsaromatherapy.co.uk/post/is-nose-blindness-really-a-thing

^[51] https://www.newscientist.com/article/dn25935-alcohol-improves-your-sense-of-smell-in-moderation/#:~:text=How%20do%20you%20smell%20after,sense%20of%20smell%20through%20practice.

^[52] https://www.brewersassociation.org/brewing-industry-updates/hop-selection-guidelines-for-brewers/

^[53] https://en-academic.com/dic.nsf/enwiki/3748347

^[54] https://www.beerpulse.com/2017/11/brewers-association-funds-public-hop-breeding-program-through-usda-agreement-5435/

^[55]

^[56] https://www.nber.org/system/files/working_papers/w13141/w13141.pdf

^[57] https://www.investopedia.com/terms/d/deadweightloss.asp

^[58] https://www.forbes.com/quotes/10399/

^[59] https://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=1211&context=wmblr

^[60] https://www.josiahroche.co/blog/13-dangerously-powerful-marketing-biases/

^[61] https://www.historytoday.com/miscellanies/original-influencer

^[62] https://www.britannica.com/biography/Edward-Bernays

^[63] https://www.canr.msu.edu/news/understanding-the-importance-of-the-hop-storage-index#:~:text=According%20to%20Van%20Holle%20(2017,indication%20of%20good%20quality%20hops.&text=Because%20harvest%20timing%2C%20temperature%2C%20oxygen,packaging%2C%20and%20storage%20is%20imperative.

^[64] https://www.researchgate.net/publication/338729879_Influence_of_weather_conditions_irrigation_and_plant_age_on_yield_and_alpha-acids_content_of_Czech_hop_Humulus_lupulus_L_cultivars

^[65] https://www.uvm.edu/sites/default/files/Northwest-Crops-and-Soils-Program/2014-ResearchReports/Hop_Storage_Report_Jfinal.pdf

^[66] https://www.infona.pl/resource/bwmeta1.element.ID-2e0e115a-556f-4576-a2bb-e7ae343d4603/content/partDownload/content/full-text/bd41fd53-dc57-4cd9-bd33-18522f59b4fa

^[67] https://americanhopmuseum.org/hop-seasons

^[68] https://brauwelt.com/en/sponsored-news/hopsteiner/628306-new-cold-storage-for-leaf-hops

^[69] https://www.geterbrewed.com/blog/2019/03/24/how-long-do-hops-last/

^[70] https://onlinelibrary.wiley.com/doi/abs/10.1002/jib.648

^[71] https://allaboutbeer.com/how-the-hop-harvest-window-impacts-aroma/

^[72]https://www.researchgate.net/publication/314517898_Influence_of_Picking_Date_on_the_Initial_Hop_Storage_Index_of_Freshly_Harvested_Hops

^[73] https://bsgcraftbrewing.com/hops-american-hops-amarillo/

^[74] Lower five-year average yields are usually the result of one very bad year that drag the rest of the year’s average downward.

^[75] https://agriculture.ec.europa.eu/common-agricultural-policy/cap-overview/cap-glance_en#:~:text=The%20CAP%20provides%20income%20support,animal%20health%20and%20welfare%20standards.&text=The%20CAP%20shifts%20from%20market%20support%20to%20producer%20support.

^[76] A more accurate way to measure in the increased costs would be to measure the individual components like natural gas, labor and other variables that are not included in the CPI figure. This is not difficult, but for the sake of brevity I used the CPI figure, which offered a similar number.

^[77]

https://www.usinflationcalculator.com

^[78] https://www.usahops.org/enthusiasts/stats.html

^[79] https://firstamendment.mtsu.edu/article/united-states-v-united-foods-inc/

^[80] https://www.theledger.com/story/news/2003/04/17/apple-commission-shutting-down/26047859007/

^[81] https://caselaw.findlaw.com/court/ca-court-of-appeal/1757992.html

The U.S. has always been at the forefront of hop industry developments, and this time is no different. Many American farms are in critical condition. Since 2012, according to Hop Growers of America the value of the U.S. hop crop tripled. During that time, farmers in the Pacific Northwest (PNW) produced $5.8 billion worth of hops^[1]. The problem is farmers and merchants spent billions keeping pace with anticipated demand. Of course, fortunes were made along the way. Some benefited more than others.

“The future is already here – it’s just not evenly distributed.”

-       William Gibson

Moo

Royalties are marketed as a method for funding future variety development^[2]. While that is true, it ignores the massive windfall profit successful varieties generate. A variety like Citra ®, HBC 394, which was developed from a cross in 1990 and patented in 2009 is a cash cow^[3]. If we apply the royalty rate I documented in my April 2023 article, “The Secret Behind Who Controls the Hop Industry” to production of HBC varieties between 2013-2022, the four families that own that company made somewhere between $200-300 million in royalties^[4][5]. It alone has likely paid for the entire HBC breeding program since its inception and will continue to for the foreseeable future. From the way proprietary varieties are marketed, their purpose seems to be exploiting brewer FOMO^[6] to create a competitive advantage for their owners … not advancing the good of the industry. Follow the money.

Those four families that own HBC varieties own farms that profit from the hops they produce. They own merchant companies that profit from the hops they sell. By the time a brewer receives an HBC variety, these four families have profited three times. It’s a brilliant scheme! Owning the varieties produced on half of the U.S. acreage has not only made them wealthier and more powerful, it’s created a competitive disadvantage for anybody who opposes them.

The farms to which they licensed those varieties during the good times profited well from their alliance. Now that the industry is scaling back, farmers without ownership in Yakima Chief Hops™^[7] or who don’t have a deal with John I. Haas to access HBC varieties are in trouble. That is a consequence of the system the craft brewing industry created by chasing one company’s proprietary varieties. Farmers wanting the attractive prices agreed to grow proprietary varieties they didn’t own. Unlike the breweries that had to sign five-year contracts, farmer contracts could be canceled each year. That left them vulnerable to downturns in the market, which is causing the imbalance in the market today.

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The Four Hops of the Hopocalypse

This article is a public service announcement to alert craft brewers about the consequences of their unhealthy addiction to Citra ®, HBC 394, Mosaic ®, HBC 369, Simcoe ®, YCR 14, and Pahto ™, HBC 682. Maintaining the status quo (i.e., the idea that you must have these varieties to make good beer) may cut the number of farmers by up to half. In 2023, according to the USDA, those four HBC varieties represented 20,098 acres (8,136 ha.) or 37% of the acreage planted in Washington, Oregon and Idaho^[8]. That concentration of power enables them to determine who advances to the next round and who gets voted off the island. This is a system that resembles feudalism more than capitalism^[9]

Patent Law 101

According to the U.S. Patent and Trademark Office (USPTO), The intent of a patent is to give the inventory a temporary advantage for 20 years unless the exclusivity is extended by the USPTO^[10]. Under U.S. patent law when a patent expires a few things happen:

1. The intellectual property (IP) enters the public domain,

2. Others are free to use and market the invention,

3. The inventor may stop receiving patent-related royalties, and

4. Patent-related licensing agreements are no longer enforceable^[11].

When a patent expires, generic brand products can enter the market^[12]. Patent holders often try to extend their IP rights beyond the 20-year period^[13]. Highlighting the value of the brand (i.e., Simcoe®, YCR 14) versus the patent name (i.e., “YCR Accession No. 14”) is one strategy to extend the value of the patent during Loss of Exclusivity (LOE)^[14]. The patent for Simcoe ®, YCR 14 expired in 2019^[15]. The patent for Amarillo®, VGXP01 expired in 2020^[16]. Why, then, have they not entered the public domain?

There is no incentive to release proprietary varieties into the public domain. That’s why. Private hop variety development programs do not exist to further the development of the industry. A 2018 Yakima Chief Ranches (YCR) PowerPoint presentation no longer available online provides insight into their reasoning. In it, Jason Perrault explained why proprietary hop varieties are named the way they are today (i.e., using both the brand name and the variety patent name):

“The reason for identifying both the brand and the variety name is patents expire after 20 years, and if the two names were the same US Patent and Trademark law views this as extending the life of the patent beyond the 20 years.”

This may not be accurate. There is a legal argument that trademark protection and varietal protection are mutually exclusive^[17]. The handful of men controlling the hop industry have concentrated their power and wealth during the past decade. Their opponents grow weaker with each passing crop. No farm or group of farmers can challenge whether this strategy extends exclusivity without fear of retribution. It all sounds very cloak and dagger or like something you would see in a mafia movie. The fear is real.

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Change of the guard

In July, 2022, in my article entitled, “Has a Cartel Taken over the Hop World?” I explained how the power of proprietary varieties would change the industry.

In a section called “The New Market Share”, I wrote:

“Under the old paradigm, a grower that had more acreage might be viewed by his neighbors as more relevant because they controlled more resources. This is a farmer rendition of seeing who has the biggest penis. With proprietary hop varieties and contract production, the size of a farmer's ... tracts of land ... no longer determines relevance. With proprietary varieties and contract farming, a new power dynamic is governing the hop industry.”

The acreage reductions of 2023 and 2024 demonstrated this to be true. The biggest burden has fallen on the competitors of the proprietary variety owners. If you’re a brewer and don’t care, you will regret that decision by 2030. If you think the success of proprietary varieties represents capitalism at work, keep reading. You’ll understand why it will impact every brewery within the next five years if no action is taken.

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Death by 1,000 cuts

The acreage reductions of 2025 will be the final nail in the coffin for some farms. If nothing is done, they will bring the end of free market competition in the hop industry. It may take a few years for hop farmers and merchants to realize there is no longer a place for them. The barriers to become a hop farmer are enormous so they are slow to leave. According to the 2020 WSU Cost of Hop Production Survey, the cost to start a hop farm in 2020 was over $20 million^[18][19]. Once farmers leave the industry, the odds they return are low. They will, therefore, attempt to stay relevant at all costs. Once they leave, the feudalist system that will flourish will not let them reenter. It will control production, dictate prices and further concentrate wealth and power among a few oligarchs.

“Competition is a sin”

-       John D. Rockefeller

In addition to favoring specific farmers and merchants, today’s acreage reductions favor proprietary acreage. According to the USDA, the percentage of U.S. proprietary acreage is higher in 2023 than ever despite massive acreage reductions (Figure 3). What is the incentive to market public hops when the owners of the biggest hop merchants profit from the royalties on proprietary varieties to which they have exclusive access?

Figure 3. U.S. Proprietary Variety Acreage not including “other and experimental” acreage 2010-2023

Source: USDA NASS National Hop Report 2010-2023

What acreage reductions are necessary to restore balance? It’s a moving target so the honest answer is nobody knows yet. The data offer a glimpse where American acreage will be before balance is restored. Inventory buildup among merchant/farmers began to develop in 2012 when craft production surged. A noticeable increase occurred between the 2015 and 2016 crop (Figure 4). That signaled the existence of a growing surplus.

Figure 4. 50-year trend of March 1 hop stocks separated by brewer-held and merchant/farmer-held inventory

Source: USDA NASS March 1 Hop Stocks 1974-2024

Another obvious signal of a building surplus is that the inventory depletion rate decreased and stayed below long-term averages (Figure 5).

Figure 5. Percent depletion relative to total available supply 2002-2023

Source: USDA NASS September 1 Hop Stocks 2002-2023

Despite these signs, people who knew better continued aggressive sales tactics. They forced long-term contracts on craft breweries. I explained why in my March 2023 article entitled, “Surplus Contracting Tactics”. As a result, acreage continued to increase between 2017 and 2021 (Figure 6).

Figure 6. Total Hop Acreage in the Pacific Northwest

Source: USDA NASS National Hop Report 2014-2023

To fix the surplus the U.S. industry must decrease acreage to somewhere around 2015 levels, 43,333 acres (17,543.7 ha.). That corresponds to the statement made by Tom Davis, John I. Haas CEO, to reduce 10,000 acres from 2023 levels at the 2024 Hop Growers of America convention in January^[20][21].

FUN FACT: 

A “farming unit” according to the WSU Cost of Hop Production Survey is 600 acres (242.9 ha.)^[22]. The reduction of the industry from its peak of 60,872 acres (24,644 ha.) to my estimate of 35,000-39,000 acres (14,170 – 15,789 ha.) means 36 - 43 farming units will shut down in the coming years. That represents approximately three quarters of a billion dollars in infrastructure that will be mothballed in the next few years.

What Tom did not account for … or perhaps what Tom preferred not to say … was that deeper cuts will be necessary in 2025. The industry must create a deficit to give the surplus somewhere to go. Either that or surplus inventory must be extracted to remove it from the aroma market. I believe they are doing both. Even creating a deficit for the surplus is not enough. There is a bigger problem.

“I skate to where the puck is going to be, not where it has been.”

-       Wayne Gretzky

I hope this article provides some value for you. I enjoy writing them. You probably won’t read about the topics I write about anywhere else. If you find them interesting and entertaining, or if you just want to keep up with what’s being discussed, please consider becoming a paid subscriber today.

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On the move

While everybody tries to determine how large the surplus is and how many acres must be produced in the future, the target has moving. Rising costs of production^[23], a more competitive beer market^[24], changing drink preferences^[25], and more efficient hop products like oils and downstream products are increasing the size of the acreage reduction needed. How much is unknown. Companies offering extracts and oils boast increased efficiencies for breweries between seven and 500%^[26][27][28]. That’s quite a range! With more companies offering oils, and a difficult economy, extracts and downstream products gain greater acceptance by breweries looking to save money.

This play comes from the alpha playbook of the late 1970s and early 1980s. The release of Galena^[29] and Nugget^[30] in 1978 and 1981 respectively increased the alpha acid farms produced per acre. The creation of private hop breeding programs in 1988^[31] led to the first proprietary “super alpha” varieties in the 1990s. Farmers thought in acres and pounds of hops at the time, not kilos of alpha produced as they do today. They produced the new varieties on existing acreage rather than decreasing production in proportion to the increased efficiency. Alpha production soared. Prices, in turn, plummeted and stayed low for 20 years (Figure 8). Voluntary acreage reductions have been difficult in the past. That is one advantage of proprietary varieties. They offer absolute control over production.

Figure 8. 75-year history of U.S. Season Average Prices Adjusted to 2023 dollars 1948-2023

Source: USDA NASS

With such wide-ranging claims of efficiency by the oil companies, if they are successful, an additional 10-20% decrease in global acreage is reasonable. Since American proprietary varieties are the most expensive, they are the logical first targets. That means the target acreage for the U.S. is somewhere between 35,000 and 39,000 acres (14,170 – 15,789 ha.) within the next five years.

“Above all, don’t lie to yourself. The man who lies to himself and listens to his own lie comes to a point that he cannot distinguish the truth within him, or around him, and so loses all respect for himself and for others.”

-       Fyodor Dostoevsky, The Brothers Karamazov

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Club Hops

According to the USDA, the U.S. had 31,933 acres (12,928 ha.) in production in 2012 before the craft beer boom. Can’t farmers go back to their original size? That is not how the acreage reduction is being managed. Instead, it represents an opportunity for those in power to concentrate their hold on the industry.

Companies have weaponized the leverage of proprietary hop varieties to encourage sales of public varieties by making offers no brewer can refuse. Under the current regime, brewers can expect to be sold an ever-increasing basket of proprietary varieties from fewer independent merchants and farmers. Proprietary varieties will be sold as the answer to everything including climate change^[32][33]. This article in the prestigious Journal of Nature Communications claimed European hop production would no longer be viable by 2050^[34]. The article based its conclusions on faulty data. I debunked the article and their claims two weeks after the article was published in my October 2023 article, “Climate Change is NOT Coming for your Hoppy Beer”. Despite my reporting the misleading conclusions based on flawed data, six months later, the article has not been retracted.

On the industry’s current path, public varieties will become a novelty. This type of industry concentration has already happened in the U.S. corn and soybean industries where patented seed represents over 90% of acreage^[35][36]. Anybody trying to operate outside the system is punished^[37].

We like to believe that the company that produces the highest quality for the lowest cost is rewarded with success. Under the system we imagine exists, companies are incentivized to improve and become more efficient to stay ahead of their competition. Proprietary hop varieties changed that in just 12 years. Winners and losers are now hand-picked, not chosen by the market. Much like under the Soviet system, membership, nepotism and cronyism are rewarded instead of efficiency and quality^[38].

There’s no published explanation about the relationships in the hop industry yet. I’ll write an article on this in the future. For now, this article about the Washington apple industry’s “Club Apples” offers a good comparison^[39]. For those of you who don’t already know, many Washington hop farmers also produce apples. They would be familiar with this system.

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Hopocalypse

If you’ve been reading my articles for a while, the acreage reductions are no surprise. You also know what’s coming next. If independent farmers and merchants don’t survive, brewer options in a post-hopocalyptic world will be limited. Brewers who would like to have a choice of merchants and farmers from whom they can purchase their hops in the future need to act if given the chance.

In the next few years the surplus will be gone. External shocks or demand instability is often responsible for destabilizing cartels^[40]. If they survive the next few years, and if nothing has changed, a small group of people will control the industry. They will maintain perpetual deficits large enough to justify high prices and forward contracting yet small enough not to trigger panic. Every proprietary variety purchased today is a vote against the independent farmer way of life. There’s nothing wrong with proprietary varieties in and of themselves. It’s the disproportionate brewer reliance on proprietary varieties that caused the imbalance present today. I wrote about the Faustian bargain brewers and farmers made in my August 2022 article entitled, “Who Owns Your Beer”. If you want a fun summary of the story of Dr. Faust by Thug Notes, click here. In his analysis, the host explains how one version of the story represents the idea that mistakes can always be forgiven. I like that idea.

Balance is necessary to keep the free market intact. I believe there is something that can be done to change the course of the industry. A resistance movement highlighting ethical sourcing is necessary. I plan to talk with brewers across the U.S. this summer about the situation to gauge the demand for such a program. If that sounds interesting to you, let me know by messaging me either on Instagram or on LinkedIn.

Stay tuned!

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^[1] https://www.usahops.org/img/blog_pdf/474.pdf

^[2] https://www.bendsource.com/special-issues-and-guides/hops-university-2318330

^[3] https://patents.google.com/patent/USPP21289P3/en

^[4] (i.e., John I. Haas, part of the Barthhaas Group (i.e., The Barth family), and Yakima Chief Ranches (the Smith, Carpenter and Perrault families)

^[5] https://yakimachiefranches.com/history/

^[6] https://www.merriam-webster.com/dictionary/FOMO

^[7] These farmers are also listed in the article “The Secret Behind Who Controls the Hop Industry” https://mackinnonreport.substack.com/p/the-secret-behind-who-controls-the

^[8]https://www.nass.usda.gov/Statistics_by_State/Regional_Office/Northwest/includes/Publications/Hops/2023/hops1223.pdf

^[9] https://www.britannica.com/topic/feudalism

^[10] https://www.uspto.gov/patents/basics/manage#rights

^[11] https://www.goldsteinpatentlaw.com/what-happens-when-patent-expires/

^[12] https://www.washingtonpost.com/archive/politics/1999/02/03/seeds-of-discord/c0f613a0-02a1-476f-b54d-af25413844f5/

^[13] https://www.theatlantic.com/ideas/archive/2023/06/pharmaceutical-generic-drugs-pay-for-delay/674410/

^[14] https://www.ey.com/en_us/life-sciences/navigating-pharma-loss-of-exclusivity

^[15] https://patents.google.com/patent/USPP12213P2/en

^[16] https://patents.google.com/patent/USPP14127P2/en

^[17] https://www.knowmad.law/blog-post/plantpatents

^[18]https://www.usahops.org/cabinet/data/TB38E%20Conventional%20and%20Organic%20Hops%20Enterprise%20Budget%20in%20PNW.pdf

^[19] I believe the true cost to start a hop farm would be much lower than that and that the numbers in the 2020 WSU Cost of Hop Production Survey are wildly exaggerated. The point remains it would take millions of dollars, specialized knowledge and contacts to enter the industry. Each of these presents a formidable barrier, the least difficult of which is probably the financial component.

^[20] https://brewingindustryguide.com/the-next-hop-market-correction/

^[21]

https://hopqueries.com

^[22]https://www.usahops.org/cabinet/data/TB38E%20Conventional%20and%20Organic%20Hops%20Enterprise%20Budget%20in%20PNW.pdf

^[23] https://chicago.suntimes.com/consumer-affairs/2023/8/4/23816281/beer-prices-high-explained#:~:text=Watson%20and%20other%20beer%20industry,NielsenIQ%2C%20the%20consumer%20intelligence%20company.

^[24] https://www.forbes.com/sites/louisbiscotti/2023/01/19/craft-beer-boom-slows-but-still-grows/?sh=184fe8a35e3e

^[25] https://brandfinance.com/insights/shifting-habits-emerging-trends-in-the-north-american-alcoholic-drinks-market

^[26] https://abstraxtech.com/blogs/press-releases/abstrax-innovates-dry-hopping-and-flavoring-process-for-beer-and-beyond

^[27] https://abstraxhops.com/blogs/press-releases/abstrax-hops-unveils-quantum-brite-transforming-brewing-with-revolutionary-hop-extracts

^[28] https://www.probrewer.com/companies/glacier-hops-ranch/

^[29] https://beermaverick.com/hop/galena/

^[30] https://beerandbrewing.com/dictionary/K2R8d4KQM2/

^[31] https://www.nutraceuticalsworld.com/issues/2003-03/view_supply-source/supply-source-yakima-chief-exploring-the-nutraceut/

^[32] https://www.just-drinks.com/features/climate-concerns-fuel-hop-growers-innovation/

^[33] https://www.brewbound.com/news/supplier-news/hopsteiner-licenses-cls-farms-to-grow-and-market-four-of-its-proprietary-varieties/

^[34] https://www.nature.com/articles/s41467-023-41474-5

^[35] https://www.cleveland.com/nation/2009/12/monsanto_uses_patent_law_to_co.html

^[36] https://www.marketplace.org/2013/05/13/monsanto-behemoth-controls-90-percent-soybean-production/#

^[37] https://www.science.org/content/article/us-supreme-court-upholds-monsanto-soybean-patents-rejects-blame-bean-defense

^[38] https://www.cia.gov/readingroom/document/cia-rdp87t00787r000400520001-5

^[39] https://www.vox.com/culture/2016/10/6/13078268/honeycrisp-apple-explainer-club-apples

^[40] https://www.hbs.edu/ris/Publication%20Files/07-011.pdf

This is the time of the year when it appears there’s not much happening in the hop industry. Like a duck that appears calm on the surface, there’s a lot of activity under the surface.

In this edition of the MacKinnon Report, I discuss in why you should never believe reports that the hop crop may be threatened due to a lack of water. I explain why the U.S. and the EU may have no choice but to encourage mass immigration and why labor problems may be a thing of the past. I provide an update on the state of the Citra® Brand HBC 394 market. Finally, I discuss the symbolism of the Baltimore bridge collapse. Find out how these things are related to the hop market and affect the price of beer going forward.

WATER WATER EVERYWHERE

In February, there was a lot of news of a light snowpack in the Cascade mountains^[1]. Nervous articles referenced the El Nino cycle and climate change in this article^[2]. The “Climate Lab” at the Seattle Times implied in February there was little hope for the snowpack in the months ahead^[3]. These articles are recycled every year in February and March. Here’s one from 2023^[4]. Here’s one from 2022^[5]. Here’s one from 2021^[6]. Here’s one from 2020^[7]. I could go on, but you get the point.

Every year, farmers point to these articles in February or March and imply the possibility of a lack of water for their crops in the Yakima valley. The problem with that is that winter is not over when the articles are recycled. It’s possible that it won’t snow anymore in any given year because weather is infamous for its unpredictability. Everybody who lives around the Cascade mountains knows that February is too early to call the end of winter. It’s far too early to predict disaster as I publish this article in April. As this reporter admits, snowpack often peaks by April 1^st. The article continues, “but we’ve seen plenty of seasons where through like April 15 we can still get some pretty significant snow in the mountains”^[8]. Brewers who don’t live near the Cascades don’t know this, so they are vulnerable to propaganda.

“Profit is sweet, even if it comes from deception.”

-       Sophocles

THE CALM BEFORE THE STORM

There’s not much action in February and March on the farmer side of the hop world. It’s the time of year in the Yakima valley when farmers can still plant if they can sell some hops they haven’t already planted. After a winter of looking at empty hop yards, farmers are ready to get the season going. They can be anxious about the coming year if the market isn’t good. They know every brewer fears not getting their hops because, as people around the world say, “without hops there is no beer”^{[9][10][11][12][13]}. Adding the inference that this year’s crop might be short due to a lack of water can’t hurt.

SNOWPACK

Yakima is a semi-arid desert and gets about eight inches (20.32 cm) of rain each year^[14]. Irrigation water for crops relies on the mountain snowpack that runs through the rivers all summer. What matters is the Snow Water Equivalent (SWE). You can check snowpack levels and the Snow Water Equivalent (SWE) levels for yourself on a USDA Natural Resources Conservation Service snow and water interactive map.

In 2024, the SWE in the Cascades is above the 30-year average. Based on the current snowpack and the river forecasts, there will be plenty of water to produce the 45,000 – 50,000 acres (18,218 – 20,242 ha.) farmers in the Pacific Northwest (PNW) will produce in 2024 (Figures 1 & 2) ^[15].

Figure 1. 120-day river forecast

Source: NOAA

Figure 2. Snow percent of average in mountains surrounding Yakima

Source: NOAA

According to the Hop Growers of America statistical report, the U.S. hop industry reached peak hop acreage in 2021 with 62,259 acres (25,206 ha.). In 2023, U.S. hop farmers harvested 55,710 acres (22,554.6 ha.)^[16]. Much of their trellis … and the capacity to irrigate it remains available in 2024. When farmers begin to remove trellis from the ground, that will signal the industry has understood the need for change.

HOW MUCH IS ENOUGH?

In 2005, snowpack in the cascades was one-third of normal^[17]. In 2015, a drought in the Yakima valley led to lower yields^[18]. Water levels in the upper Yakima basin were 23% of normal^[19]. Snowpack in 2005 and 2015 were far below average. Snowpack from several stations around the Cascades reflect the deficit (Figures 3, 4, & 5).

Figure 3 Crystal Mountain Snow Depth on March 15^th of each year.

Source: https://cliffmass.blogspot.com/2021/03/the-northwest-snowpack-trend-of-past.html

Figure 4. Snoqualmie Pass Snow Depth on March 15^th of each year.

Source: https://cliffmass.blogspot.com/2021/03/the-northwest-snowpack-trend-of-past.html

Figure 5. Paradise (Mt. Rainier) Snow Depth on March 15^th of each year.

Source: https://cliffmass.blogspot.com/2021/03/the-northwest-snowpack-trend-of-past.html

The question is not the level of the snowpack. The question brewers should care about is what effect a low snowpack has on U.S. hop production. The answer is not much. The issue is water rights and accessibility. People with senior water rights get water before others. Nevertheless, in a drought situation, farmers like Brad Carpenter, who has less desirable water rights, was able to shuffle around water rights from neighbors to access water during drought years^[20][21]. According to the USDA, during the worst snowpack years (i.e., 2005 and 2015) the decrease in average U.S. hop yields was less than 10% from the previous year (Figure 6).

Figure 6. Average U.S. hop yield for the Pacific Northwest from 2000-2020

SOURCE: USDA NASS NATIONAL HOP REPORT 2000-2020

You may notice in figure 6 above that in 2016 hop yields decreased from 2015 despite the presence of ample snowpack. According to Blake Crosby, President of Crosby Hop Farms, in 2016, those low yields resulted from lower-yielding aroma varieties^[22]. In a future article, I will discuss who has the most environmentally friendly varieties.

Next February or March, when you read reports of low snowpack in the Cascades, don’t worry. If some ambitious hop farmer decides to highlight it and infer it may impact the coming crop, take it with a grain of salt. Even during years when there is not a massive surplus of tens of millions of pounds of hops languishing in warehouses around the world, the way the system works there can never be an actual shortage. I’ll explain why that’s true in a future article.

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LABOR PAINS

Immigrants are flooding into the U.S. and the EU. By October, there will be an estimated eight million asylees in the U.S. from around the globe^[23][24][25]. In the U.S., there are two types of immigrants, undocumented (i.e., illegal) and asylum seekers, which are in the U.S. legally according to 2021 rule changes under the Biden administration^[26]. The difference is important. It will affect agricultural labor. Refugees and asylees are allowed to work^[27][28]. According to the “Asylum Seeker Work Authorization Act of 2023”, asylum seekers are entitled to an expedited work permit, which can take as little as 30 days to receive^[29].

In theory, undocumented people are not allowed to work. In 2024, however, they have some of the same rights as citizens^[30][31]. In testimony before the “Subcommittee on Health, Employment, Labor, and Pensions, of the Education and the Workforce Committee” on September 13, 2023, Steven A. Camarota, Director of Research at the Center for Immigration Studies testified that there were an estimated 12.6 million illegal immigrants in the U.S. as of May 2023.  Of that 12.6 million, he estimated nine million had entered the workforce^[32].

There are politicians that want to legalize undocumented immigrants and give them a path towards citizenship^[33][34][35]. The bipartisan Dignity Act^[36], which is not expected to pass, would create several ways for illegal immigrants to become legal^[37][38].

SOCIAL PROGRAM COLLAPSE

In 2023, the US has lowest birthrate in over 200 years at 12.2 per 1,000 people^[39][40]. Replacement theory has been politicized and labeled by those on the left as right-wing racism^[41].  That’s a distraction. Again, you need to follow the money. Potential workers are being brought into the U.S. at a faster rate than ever before^[42]. This has nothing to do with race. It is about financing the future. Janet Yellen, U.S. Secretary of the treasury, said on March 27, 2024 that there is a $175 trillion gap in social security and Medicare funding^[43]. You can view that and other statistics including the U.S. national debt for yourself on this fun web site.

Figure 7. U.S. Debt Clock

Source: www.usdebtclock.org

The low number of births will translate into fewer younger workers paying into the tax system. That threatens retirement schemes in the U.S., which is set up as a Ponzi scheme. The White House admitted that immigrants must be legally ushered into the workforce as quickly as possible to become taxpayers or the social system will collapse^[44]. No politician wants that to happen while they are in office. The same problem plagues the EU^[45][46].

LABOR PROBLEMS NO MORE

This affects the price of a beer. Labor has traditionally been one of the challenges hop farmers often cite when talking about the difficulties of their work^[47][48][49]. Labor needs surge in the spring when hops are twined and trained and again during harvest. Since 1986, the U.S. has arranged for “guest workers” to temporarily come to the U.S. to work in agriculture under the H2A visa program^[50]. The number of H2A workers has increased 1,700% since 2009^[51]. Washington State ranks third after Florida and California in the number of temporary workers it imports under the program^[52]. In 2023, one hop farm had as many as 500 H2A employees each of which cost between $16.00 and $17.99 per hour^[53][54]. The program provided temporary workers for years. It too is a bureaucratic nightmare, but it works. The larger problem with H2A visa holders is that the IRS does not withhold money from worker paychecks for Social Security and Medicare since they are beneficiaries^[55] (i.e., they don’t help solve the United States’ insolvency problem).

Trump has said he will round up migrants and send them home. That is popular among his base^[56]. It’s hard to imagine how such an effort might work without imposing a police state^[57][58]. His opponents will certainly make comparisons to the last time so many millions of people were rounded up 91 years ago^[59]. Trump has broken campaign promises in the past. All politicians do. He promised to build the wall with Mexico in 2016. He promised to release all the documents regarding the JFK assassination. Once in office, he decided it wasn’t prudent. When Trump’s economic advisors show him that his options are to either allow tens of millions of migrants to stay and pay taxes, cut Social Security and Medicare benefits to elderly Americans, or raise taxes his choice will be obvious, a compromise that looks like action but falls far short of his stated goal. The silver lining to what appears to some to be a dark cloud is that labor problems may be a thing of the past once asylees are required to work.

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CITRA® BRAND HBC 394 MARKET UPDATE:

In my March 14, 2024 article, “Collaboration, bankruptcy, low hop prices, two predictions and more”, I mentioned a listing for 1,100 pounds (500 kilos) of “2020 U.S. Citra®” available for $4.00 per pound (Figure 8). https://mackinnonreport.substack.com/p/themackinnonreport

Figure 8. March 14, 2024 listing for Citra® Brand HBC 394 hops

Source: Lupulin Exchange from March 14, 2024

On April 2^nd, I checked on Lupulin Exchange to see if the hops were still there. They weren’t (Figure 9). I followed up with the seller to see if he had sold the hops at $4.00 per pound. They didn’t sell. When what was the most popular proprietary hop variety does not sell at a fraction of its former cost, it is a sign that the market has changed. Demand is all but gone. The market is flooded and needs to find the price at which hops will move once again. If those hops have been stored properly, which I am told they were, they likely have lost only a small part of what makes the variety so special. If nothing else, they would be a cheap alpha bittering option … but there was no interest. I wonder if they would move at $2.00 per pound. If you’re a brewer and might be interested at that price, let me know. They’re not my hops to sell, but I can let the owner know. Maybe you’ll get a great deal.

If this continues through summer, brewers will

see fire sale prices prior to harvest as merchants try to clear their warehouses to make space for the 2024 crop.

Figure 9.  Citra® Brand HBC 394 hops cheapest listings on April 2, 2024

Source: Lupulin Exchange

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BALTIMORE BRIDGE SYMBOLISM

Many media outlets reported that the Baltimore bridge incident would create problems with the supply chain^{[60][61][62][63]}. Immediately, conspiracies surfaced^[64]. Once people calmed down, we learned the ship had serious electrical problems while still in port^[65]. Reports that the bridge collapse would disrupt the supply chain were exaggerated. Excess capacity at other ports across the eastern seaboard will make up the lost shipping capacity in Baltimore^[66][67].

HANLON’S RAZOR:

“Never attribute to malice that which can be explained by neglect, ignorance or incompetence.”^[68]

-       Robert J. Hanlon^[69]

The symbolism of the bridge bearing the name of the author of the U.S. national anthem could not be more obvious^[70].  The situation in Baltimore brought attention to the state of American infrastructure, which badly needs updating^[71]. There is another symbolism that has not been fully explored. Estimates are that rebuilding the Baltimore bridge will cost $2 billion and could take up to a decade^[72][73].

The problem is not a lack of technical expertise. In 1931, Americans built the Empire State building in 410 days^[74]. People can do amazing things … if they are allowed to. According to Jamie Dimon, CEO of JPMorgan, bureaucracy has crippled the U.S. and hinders progress^[75]. The Baltimore bridge is the most recent example, but there are many. For example … The U.S. has lost its global dominance in nuclear energy. It has 95 power plants in operation and one under construction. The permitting process is the primary obstacle^[76]. China, on the other hand, has 21 nuclear power plants under construction^[77].

HOP BUREAUCRACY

The hop industry has become a victim of bureaucracy. Twenty years ago, the industry was almost unregulated. You could walk into somebody’s office or have a look at one of their fields if you wanted. Today, you need to sign in and have a badge to walk in a field. American hop farms became corporate. In the process, they lost part of their soul. They are expected to have multiple certifications to demonstrate standards of quality, or that they care about the environment. I may have missed some, but here’s a pretty good list:

• HAACP (Hazard Analysis Critical Control Point)^[78]

• ISO9000 (International Organization for Standardization)^[79]

• Salmon Safe certification^[80][81].

• Kosher certified facility^[82][83].

• Global G.A.P.^[84][85]

• Safe Quality Food (SQF) certification^[86][87]

• FSSC 22000 certification, which is part of the ISO-based Global Food Safety Initiative (GFSI) program. Brewers Supply Group mentions on their website that they have the FSSC certification^[88].

• LEED (Leadership in Energy and Environmental Design) Gold certified building^[89]. The John I. Haas Innovation center located in Yakima is a LEED certified building. This means their office building is greener than traditional construction^[90].

• Yakima Chief Hops™ (YCH) has their Green Chief® program^[91]. According to its website, it is through the Green Chief® program YCH controls the many variables on the 25 participating farms to ensure they get the proper quality.

• Sustainability reports. There are too many examples of these in the hop industry to list.

I assume each of these ideas was born of good intentions. Each stands for something that is hard to argue with, like protecting the environment, or safety.

These certifications as sometimes used as marketing tools to virtue signal and to gain a competitive advantage. They are even advertised as such by companies who exist to help other companies get certified^[92]. Certifications like this favor large companies. Small farms are discounted because they cannot scale to feed a growing population^[93]. Larger farms can afford the additional expense of a compliance officer. On smaller farms (think any European hop farm) that responsibility falls on the owner. The extra time and expense is not justified because there is no additional return.

FUN FACT:  Hops in the U.S. today are baled in new polypropylene bales every year. Twenty years ago, farmers recycled burlap bales for several seasons. Money was tight. Buying new burlap each year was wasteful. The old burlap still worked so they used it. During the past 10-15 years, craft brewer concern over food safety due to the increased popularity of dry hopping, changed that[94].

Breweries don’t pay extra for these certifications, for the additional cost of using new poly bales, for painting and cleaning the inside of picking machines, or for the compliance person most companies have on staff. You could say breweries have been paying inflated prices for the past 15 years, and these things were included in those prices. That’s true. As prices decrease, however, the lack of compensation for these practices will attract attention.

As prices decline, acreage shrinks, and money is tight, farmers will look for ways to cut corners. Before certifications were available, the market certified who had the best quality hops. Does Global G.A.P. or Kosher certification improves the quality of the hops.

FLASHBACK:  I was a Peace Corps volunteer in Latvia right after the fall of the Soviet Union. In the early 90s, many of the Soviet practices were still in place. One that didn’t seemed ridiculous at the time was that every document had to have a stamp to be official. If you didn’t have a stamp on your document, it was worthless in the eyes of the office plankton who checked for those things. The stamp was more important than the contents of the document. Those who controlled the stamps took their job seriously. They did not stamp documents lightly and they could impede your progress on important projects. I discovered a shop in Riga where I could order custom stamps. Because it was no longer the Soviet Union, the stamp company didn’t care what my stamp said on it. When I told them my idea to create a very official looking stamp, I think they were happy to be a part of bucking the system. That was the attitude in the Former Soviet republics in the 1990s. I shared my idea with some of the other volunteers. We all made stamps to streamline our certification needs and life became much simpler.

Most hop farmers around the world I’ve met produce high quality hops most of the time. They’ve mastered the hard part. Today’s bureaucracy adds additional costs and makes an already difficult job more difficult. Certifications are a biproduct of ESG regulations, which will intensify in 2024^[95][96]. ESG started at the United Nations in 2005. No surprise, it’s about money … big money. ESG mandates by investors is anticipated to represent $50 trillion in 2025^[97]. Investors want to be seen as investing in companies perceived to be responsible. ESG represents the metrics by which companies are rated. The actual rating system is not disclosed^[98]. Public companies requiring these certifications of their suppliers are doing so because they need to keep investor money flowing. It reminds me of the all-important Soviet stamp.

As prices decrease, and times get more difficult, will entrepreneurial farmers find ways to work around the system? I think some will. Will the hops be lower quality?

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^[1] https://www.kuow.org/stories/washington-s-snowpack-is-suffering-this-winter-it-s-not-going-to-get-much-better

^[2] https://www.heraldnet.com/news/warm-winter-melts-meager-snowpack-in-cascades-with-far-reaching-effects/

^[3] https://www.seattletimes.com/seattle-news/climate-lab/was-snowpack-languishes-with-little-hope-for-the-months-ahead/

^[4] https://kimatv.com/news/local/state-of-the-snowpack-february-7-2023-compared-to-last-year-washington-weather-california-snow-cascades-puget-sound-seattle-oregon-la-nina-mountains

^[5] https://www.king5.com/article/tech/science/environment/washingtons-mountain-snowpack-threatened/281-d470f42b-359a-46f2-aabe-802d2a45a491

^[6] https://www.opb.org/article/2021/03/10/cascade-snowpack-climate-change-water-supply-wildfire-risk/

^[7] https://www.npr.org/2020/02/18/803125282/how-warming-winters-are-affecting-everything

^[8] https://www.king5.com/article/tech/science/environment/washington-state-snowpack-april/281-d3724739-0c79-49f9-a9cc-925cecead8f8

^[9] https://thecraftyboozecompany.co.uk/hops-a-brief-overview/

^[10] https://www.themanual.com/food-and-drink/what-are-hops-sam-adams-jim-koch-hallertau-harvest/

^[11] https://beermapping.com/location/11181

^[12] https://www.amazon.de/171-All-About-Hops/dp/B0CSJ9WDNR

^[13] http://royfarms.com/no-beer/

^[14] https://www.yakimaherald.com/news/local/yakima-received-roughly-same-amount-of-precipitation-this-weekend-as-past-three-months-combined/article_fa369a26-3610-11ee-98f3-cfe1106efacd.html

^[15] https://www.nwrfc.noaa.gov/snow/snowplot.cgi?CSTO3

^[16] https://www.usahops.org/img/blog_pdf/474.pdf

^[17] https://www.latimes.com/archives/la-xpm-2005-feb-22-os-nosnow22-story.html

^[18] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7970847/

^[19] https://apps.ecology.wa.gov/publications/documents/1611001.pdf

^[20] https://www.marketplace.org/2017/02/17/washington-state-mulls-plan-help-keep-water-flowing-high-value-crops/

^[21] Although they are competitors, I have always been impressed to see how hop farmers help one another during times of need like droughts and kiln fires. It proves that sometimes there are things more important than money to some people.

^[22] https://brewpublic.com/beer-news/2016-usa-hop-harvest-yields-87-1-million-pounds-of-hops/

^[23] https://www.axios.com/2024/03/02/data-biden-border-crisis-immigration-8-million-detention#

^[24] https://www.cfr.org/backgrounder/seeking-protection-how-us-asylum-process-works

^[25] https://www.bbc.com/news/world-us-canada-68609930

^[26] https://www.migrationpolicy.org/news/biden-asylum-processing-proposed-rule

^[27] https://www.uscis.gov/sites/default/files/document/guides/D2en.pdf

^[28] https://www.nilc.org/issues/economic-support/table_ovrw_fedprogs/

^[29] https://immigrationforum.org/article/asylum-seeker-work-authorization-act-of-2023-bill-summary/

^[30] https://esd.wa.gov/unemployment/citizenship-and-legal-rights

^[31] https://legalaidatwork.org/factsheet/employment-rights-of-undocumented-workers/

^[32]https://edworkforce.house.gov/uploadedfiles/9.13.23_camarota_testimony_help_subcommittee_hearing_on_open_borders_and_workforce.pdf

^[33] https://www.yahoo.com/news/activists-chicago-call-biden-administration-014834779.html

^[34]

https://immigration.procon.org

^[35] https://www.fwd.us/news/pathway-to-citizenship/

^[36] https://immigrationforum.org/article/the-dignity-act-bill-summary/

^[37] https://escobar.house.gov/uploadedfiles/the_dignity_act_of_2023_one_pager.pdf

^[38] https://www.govtrack.us/congress/bills/118/hr3599

^[39] https://www.statista.com/statistics/1037156/crude-birth-rate-us-1800-2020/

^[40] https://www.cia.gov/the-world-factbook/field/birth-rate/country-comparison

^[41] https://www.pbs.org/newshour/politics/what-is-great-replacement-theory-and-how-does-it-fuel-racist-violence

^[42] https://www.project-syndicate.org/commentary/immigration-crucial-to-united-states-economic-growth-by-anne-o-krueger-2024-03

^[43] https://www.tftc.io/social-security-medicare-funding-crisis/

^[44] https://www.whitehouse.gov/wp-content/uploads/2024/03/ERP-2024-CHAPTER-3.pdf

^[45] https://www.euronews.com/next/2023/04/04/china-sees-first-population-decline-in-six-decades-where-does-the-eu-stand

^[46] https://www.reuters.com/world/europe/migration-pushes-eu-population-back-growth-2022-2023-07-11/

^[47] https://www.spokesman.com/stories/2021/sep/07/hop-harvest-underway-in-the-yakima-valley-with-gro/

^[48] https://www.marketplace.org/2022/07/21/strong-dollar-squeezing-profits-washington-state-farmers-hops-exports/

^[49] https://www.crosbyhops.com/news-blog/blog/2022-hop-report

^[50] https://nfwm.org/farm-workers/farm-worker-issues/h-2a-guest-worker-program/#:~:text=The%20Immigration%20Reform%20and%20Control,to%20be%20full%20of%20abuses.

^[51] https://www.npr.org/2023/07/27/1187682674/farm-workers-guest-workers-h-2a-visa-agricultural-harvest-farm-labor

^[52] https://www.dol.gov/sites/dolgov/files/ETA/oflc/pdfs/H-2A_Selected_Statistics_FY2023_Q2.pdf

^[53] https://www.uscis.gov/tools/reports-and-studies/h-2a-employer-data-hub

^[54] https://www.uscis.gov/sites/default/files/document/data/FY%202023%20H-2A%20Employer%20Data.csv

^[55] https://www.irs.gov/individuals/international-taxpayers/foreign-agricultural-workers

^[56] https://www.latimes.com/politics/story/2024-03-25/column-trump-wants-to-round-up-over-a-million-undocumented-migrants-from-california-heres-how-he-might-do-it#:~:text=Here's%20how%20he%20might%20do,in%20Texas%20and%20expel%20them.

^[57] https://www.reuters.com/world/us/trump-plans-sweeping-undocumented-immigrant-roundups-detention-camps-report-2023-11-11/

^[58] https://edition.cnn.com/2016/01/19/politics/donald-trump-deportation-mexico-eisenhower/index.html

^[59] https://encyclopedia.ushmm.org/content/en/article/nazi-camps

^[60] https://www.bbc.com/news/world-us-canada-68672373

^[61] https://www.washingtonpost.com/business/2024/03/27/baltimore-port-economy-disruption-bridge-collapse/

^[62] https://www.theguardian.com/us-news/2024/mar/27/baltimore-bridge-collapse-economic-impact-francis-scott-key-us-port-shipping-traffic

^[63] https://www.npr.org/2024/03/27/1241134460/baltimore-bridge-collapse-supply-chains-auto-imports

^[64] https://www.forbes.com/sites/maryroeloffs/2024/03/27/baltimore-bridge-collapse-sparks-wild-conspiracies---though-officials-continue-to-dispel-them/?sh=f16ec7e7c760

^[65] https://www.dailymail.co.uk/news/article-13246079/Dali-cargo-ship-suffered-severe-electrical-problem-docked-Baltimore-days-prior-bridge-collapse-crash-saw-suffer-total-power-failure-loss-engine-failure-port-worker-says.html

^[66] https://www.reuters.com/world/us/baltimore-bridge-port-blockade-wont-trigger-new-supply-chain-crisis-experts-say-2024-03-27/

^[67] https://www.vox.com/2024/3/27/24112995/baltimore-bridge-collapse-dali-shipping-panama-houthis

^[68] https://modelthinkers.com/mental-model/hanlons-razor#:~:text=Hanlon's%20Razor%20is%20a%20reminder,by%20neglect%2C%20ignorance%20or%20incompetence.

^[69] https://policyoptions.irpp.org/authors/robert-j-hanlon/

^[70] https://amhistory.si.edu/starspangledbanner/the-lyrics.aspx

^[71] https://eu.usatoday.com/story/news/nation/2024/03/27/baltimore-bridge-collapse-how-safe-are-americas-bridges/73113103007/

^[72] https://www.voanews.com/a/after-bridge-collapse-maryland-governor-urges-congress-to-pass-funding-for-rebuild/7551476.html

^[73] https://www.wypr.org/wypr-news/2024-03-27/baltimores-key-bridge-rebuild-could-take-a-decade-analysts-say

^[74] https://www.esbnyc.com/about/facts-figures

^[75] https://uk.news.yahoo.com/jpmorgan-ceo-jamie-dimon-says-150005321.html

^[76] http://large.stanford.edu/courses/2017/ph241/park-k2/

^[77] https://www.cnbc.com/2023/08/30/how-china-became-king-of-new-nuclear-power-how-us-could-catch-up.html

^[78] https://food.unl.edu/article/haccp-seven-principles

^[79] https://www.iso.org/standards/popular/iso-9000-family

^[80] https://salmonsafe.org/get-certified/

^[81] https://www.goschiefarms.com/sustainability

^[82]

https://www.ok.org

^[83] http://royfarms.com/certifications/

^[84]

https://www.globalgap.org

^[85] https://cornerstoneranches.com/ethos/sustainability/

^[86]

https://www.sqfi.com

^[87] https://www.crosbyhops.com/shop-hops/whole-leaf-hops

^[88] https://bsgcraftbrewing.com/bsg-hops-facility-receives-fssc-22000-certification/

^[89] https://betatec.com/wp-content/uploads/2022/10/HAAS-Sustainability-Report-2021.pdf

^[90] https://www.chase.com/personal/mortgage/education/owning-a-home/what-is-leed-certification

^[91] https://careers.yakimachief.com/green-chief/

^[92] https://www.sgs.com/en/services/esg-certification

^[93] https://agfundernews.com/esg-agriculture-the-overlooked-giant-in-the-conversation

^[94] Dry hopping does not expose the hops to boiling temperatures and therefore cannot kill bacteria that might be on the hops.

^[95] https://sustainabilitymag.com/esg/esg-policy-and-regulation-what-to-prepare-for-in-2024

^[96] https://www2.deloitte.com/ce/en/pages/global-business-services/articles/esg-explained-1-what-is-esg.html

^[97] https://www.barrons.com/articles/esg-investing-climate-un-environment-51663620697

^[98] https://www.greenbiz.com/article/esg-score-calculation-how-find-your-companys-rating-part-1

Again, there was a lot of hop-related news to cover over the past week. So much news in the hop industry in March is unusual. Future issues will have analysis of a wider variety of topics, I promise. There has been a story developing about pesticide regulation and the EU. This week things started to get exciting. I received a copy of an email sent out by one hop merchant to their customers explaining what the new regulation would mean and how it would impact their service. In it, they said they would continue to deliver conforming lots, but they may not be from the contracted crop year.

If I was a European brewer who didn’t need my contracted hops, I would review my contract with my lawyer to see if changing MRLs or government regulations were covered in the Force Majeure section or somewhere else in my contract. I don’t believe either party is allowed to unilaterally change the terms of a contract. During Covid, American farmers expanded acreage in 2020 and 2021 despite claims to the contrary^[1][2][3]. Breweries weren’t allowed to alter their contracts. Pandemics were not considered a Force Majeure event. In the current market, another merchant might be happy to make a great deal with better terms.

In this edition of the MacKinnon Report, I’ll discuss two of the pesticides slated for stricter regulation in the EU, the potential consequences, and the hop industry’s attempts to lobby the EU to change their mind. Of course, I’ll provide my analysis of the situation to put it into perspective (See Pesticide Regulation below).

I’ll break down the March 1 hop stocks report to show why this is one of the most important statistics of the year and how it hints at supply, demand and the size of the surplus. (See March 1 Hop Stocks below)

I’ll also discuss the reason why Germany and much of Europe will have trouble remaining competitive producers in the coming years. (See Germany’s Growing Problem below)

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Pesticide Regulation

Hop farmers use quite a few pesticides to receive the high yields that have become the norm. The industry battles constantly changing regulations. The US Hop Industry Plant Protection Committee (USHIPPC) unites hop farmers from countries around the globe to maintain a comprehensive list of the chemicals that can be used for various purposes and at which levels^[4]. In the past year, several pesticides have attracted the attention of the EU. Two pesticides used on hops in the U.S. have being targeted for stricter regulation. Others are being considered that would affect European hop producers. For this edition of the MacKinnon Report, Etoxazole and Bifenazate are the two pesticides we will discuss. The changes to the MRLs for these chemicals would affect the sale of U.S. hops into the EU. The estimates of the damages will surprise you. The story is a bit different than how it has been presented.

Etoxazole

On September 15, 2023, the European Union published regulation (EU) 2023/1783^[5]. The new regulation reduced the maximum residue levels (MRL) for five pesticides used on various crops. One of those pesticides, Etoxazole, is an insecticide used to control spider mites in hops^[6].  Its MRL was reduced from 15 parts per million (ppm) to 0.05 ppm^[7][8]. Perhaps this article about the toxicity of Etoxazole published in Nature in November 2022 had something to do with the stricter regulation^[9].

The new law becomes effective on April 8, 2024. After that, hops with residues of Etoxazole over 0.05 ppm cannot be used or sold in the European Union. A list of acceptable MRLs by country for Etoxazole and other pesticides used on hops is available on the website of the US Hop Industry Plant Protection Committee (USHIPPC)^[10]. It reveals several countries to which hops exceeding the MRLs for Etoxazole may be sent.

Bifenazate

Pending regulation of Bifenazate in the EU seems to be another serious problem for the American hop industry. At the time of this writing, the EU has not changed the MRL for Bifenazate. They are scheduled to decide on the new regulation at the end of March. If they approve the proposed change, the new MRL will go into effect in September 2024. The International Hop Growers Convention (IHGC) requested the Directorate-General for Health & Food Safety of the EU reconsider the change. They claim the change would cause hops from crop year 2022 and older to be illegal, which would result in more than €100 million in damages to the hop industry. They also added that the brewing industry would also suffer due to not being able to secure the hops they need^[11].

Channels of trade

Farmers never like to lose the option to use effective pesticides. The issue with both regulations, however, is the absence of the phrase “channels of trade”. According to the U.S. Food and Drug Administration, the inclusion of the term “channels of trade” in proposed regulations means that any product in circulation prior to the passage of the new law is exempt (i.e., a change in regulation would apply to product produced afterward)^[12]. The proposed EU changes do not include the clause. In a demanding submission regarding Specific Trade Concern 448 by The United States before the World Trade Organization in 2021^[13], the U.S. delegation argued that the EU should include the term “channels of trade” in the regulation of the pesticide chemicals in question. They highlighted that the EU process of enforcing reduced MRLs at the date of importation rather than the date of production created inefficiencies and disruptions in trade. They suggested that including the channels of trade clause would be the least restrictive path forward. This and related STCs continue to be debated before the WTO^[14].

Analysis

The retroactive nature of the new regulations creates difficulty for merchants trying to sell older American hop products into the EU. This is not an issue isolated to hops. Since hops may be stored for five to ten years without the loss of any quality, there is more vulnerable inventory in stock. Nor is it a new practice for the EU. Stricter pesticide regulation is part of the EU Farm to Fork Strategy, a primary component of the European Green Deal^[15]. One European Green Deal goal was to halve the usage of pesticides by 2030^[16]. Farmer protests earlier this year led to an apparent victory for farmers (I will discuss European farmer protests in a future report)^[17][18].

The IHGC suggesting that lower MRL on Bifenazate will create a €100 million loss for the industry seems to me like an exaggeration designed to increase the alleged significance of the issue. Considering that regulation will not be implemented until September 2024 at the soonest, damages can be mitigated by producing the 2024 crop in accordance with anticipated MRLs. It will be inconvenient, but it’s not a disaster. Hops once destined for the EU, or already located in the EU that are now forbidden are still usable in countries adhering to Codex MRLs, which is 15ppm^[19][20]. The additional shipping cost to send those hops to a country where they may be sold represents the loss a merchant would incur. There is plenty of demand for hops outside of the EU. In 2022, the most recent year for which we have data, the EU produced 313.3 million hectoliters (197.05 million barrels) of beer in 2022^[21]. That’s 17.4% of the 1.8 billion hectoliters (1.13 billion barrels) of beer produced around the globe^[22].

It makes no sense for the IHGC to claim expected losses equal to the total value of the hops ^[23]. I have seen members of the industry exaggerate damage claims to inflate their influence. It’s disingenuous. This is not the first time a new MRL was applied retroactively by the EU. A merchant supplying breweries or storing large quantities of American hops in the region should have known the risk. The main problem, in my opinion, is not changing MRLs, or even the retroactive nature of the changes. The issue is that tens of millions of pounds (thousands of metric tons) of hops from crop year 2022 and earlier remain in storage in 2024. Suggesting the total loss of the hops creates the potential for fear among brewers that there might be a shortage of hops … during the largest surplus in the history of the industry. There will undoubtedly be some loss as hops are shipped to alternative markets. If the financial burden of these and other pending MRL changes are too great and some merchants fail, the industry will survive.

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“When we are no longer able to change a situation – we are challenged to change ourselves.”

-       Viktor E. Frankl

MARCH 1 HOP STOCKS

On March 15, 2024, the United States Department of Agriculture, National Agricultural Statistical Service (USDA NASS) released the U.S. hop stocks figure as of March 1^[24].  You can download it here and subscribe to receive the reports if you haven’t already. The USDA continues to present the raw data using the same graph they have used for decades (Figure 1).

Figure 1. USDA NASS Hop Stocks Graph

Source: USDA NASS

As I have mentioned in previous articles, this graph tells very little about the state of the industry … even to somebody familiar with industry events. For people whose primary job isn’t deciphering hop industry data, it reveals nothing. The NASS also provides the raw data for the three most recent years in their report, which is a bit more useful (Figure 2).

Figure 2. Raw data from March 1 Hop Stocks report

Source: USDA NASS

Based on my doctoral research, the March 1 and September 1 stocks data reports are two of the most relevant reports for understanding the supply/demand position of the market. To get any value from these reports, a longer time horizon is necessary and some derivative data must be calculated. It is necessary to break down the “total stocks” number into its parts. I will do that below.

One of the valuable calculations from hop stocks report is depletion (i.e., the quantity of hops that has been delivered from inventory in the previous period). This is often calculated for the period from September 1 of the previous year to September 1 of the current year (Sept-Sept). It can also be calculated for the period between September 1 from the previous year and March 1 (Sept-Mar). Calculating the raw number is revealing when it is placed in the context of historical depletion numbers. It must be placed relative to something, however, to provide the additional context necessary to give it meaning. One way to offer context is to compare the Sept-Mar depletion number to U.S. production (Figure 3).

Figure 3. September to March depletion relative to U.S. production

Source: USDA NASS data 2000-2024

That’s not the best comparison because the hop stocks report contain hops that are imported to the U.S. in addition to U.S. hops. Figure 3 makes represents a growing U.S. production over the years while the depletion number remains stable at lower levels. From that, we might infer growing international demand for U.S. hops. The graph doesn’t tell the whole picture. For that reason, it is more useful to present the Sept-Mar depletion data against the most recent total available inventory figures. That would be the September 1 stocks figure from the previous year combined with the previous year’s crop (Figure 4).

Figure 4. September to March depletion relative to the prior year’s September 1 hop stocks figure plus the prior year’s crop.

Source: USDA NASS data 2000-2024

Figure 4 puts the growing quantity of surplus inventory in a better perspective. It represents American hop crops in storage by the end of harvest 2023.

There’s still more information that can be mined from the hop stocks numbers. The stocks numbers represent U.S. and foreign hops stored in the U.S. from multiple years. The comparison of Sept-Mar depletion year on year can be used to demonstrate relative demand. When graphed over a longer timeline, it becomes obvious that the Sept-Mar depletion rate corresponds to periods of surplus and deficit. There is also a correlation between the depletion rate and changes in price that I will not present here in the interest of keeping this article brief.

By tracking the percentage of the crop moving during the first six-month period, it is possible to measure hop velocity (the speed with which hops moved out of inventory as soon as they became available). For those who experienced hop industry events since the year 2000, it will be obvious that the percentage of the Sept-Mar depletion relative to the most recent crop (Figure 5) or to total inventory available (Figure 6) is an indicator of the urgency with which brewers took delivery of hops post-harvest. The higher the percentages, the more urgent the need for the current crop^[25].

Figure 5.  Percent of September to March depletion relative to previous crop

Source: USDA NASS data 2000-2024

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Figure 6. Percent of September to March depletion relative to total available inventory

Source: USDA NASS data 2000-2024

I have also measured the correlation between these numbers and the following year’s U.S. season average prices. There is a strong correlation between the two. With more data, it would be possible to predict prices within a narrow range. Please remember that figures five and six are a representation of hop movement over a six-month period. When the September 1 hop stocks is released later this year, I will show the first six-month period of depletion relative to the second six-month depletion (i.e., Mar-Sept) to further demonstrate the supply/demand point I made above. For now, please believe me when I say that the trend is also present in the second six-month period. But the hop stocks figures reveal even more.

By analyzing the change in the quantity of hops held in brewer hands versus those held in merchant/farmer hands, the numbers reveal where the inventory problems lie. A longer-term historical view of March 1 hop stocks numbers are necessary to demonstrate the magnitude of the shift in inventory possession over time (Figure 7).

Figure 7. March 1 hop stocks broken out by inventory held by brewers and merchant/farmers.

Source: USDA NASS data 2000-2024

Figure seven combined with the data from figure two demonstrates that merchant farmer inventory increased by two million pounds (907.19 metric tons) while brewery held inventory decreased by three million pounds (1,360.79 metric tons). If the goal of the acreage reduction efforts announced by Alex Barth in 2023 was to tighten the supply to encourage breweries to take delivery of a more surplus inventory, the effort failed^[26]. Either they miscalculated the severity of the surplus, they knew the actual size of the surplus but were afraid to reveal the true number, or they were blinded by profits and ignored the data. The information was available. In 2018, Louis Gimbel warned farmers at the Hop Growers of America convention about a surplus^[27]. He was right. Had they paid more attention to Louis, or had they read the MacKinnon Report, they would have been better informed. I wrote an article in October 2022 discussing the surplus called, “Massive Hop Inventory in the U.S.” In that article, I wrote about the supply problem affecting the industry today.

The surplus is far from over in March 2024. In my opinion, the cause is clear. Proprietary variety acreage and the number of craft breweries surged between 2012 and 2022. The contract system forced upon craft brewers by farmers via merchants contributed to the problem. Greed ran rampant through the industry as inexperienced craft brewers continued signing five-year contracts at premium prices. I was a merchant then and fell victim to the greed as much as the rest of the industry. Total inventory held by merchant/farmers soared relative to depletion for over a decade allowing a massive surplus to accumulate (Figure 8). The reduced velocity of hop shipments to breweries should have been a signal something was wrong. Nobody paid attention, or maybe they never realized that hop velocity could be calculated. Regardless the reason … the contracting continued.

Figure 8. March 1 hop stocks by brewery and merchant/farmer with highlighted change

Source: USDA NASS data 2000-2024

A surplus had developed. Between 2012 and 2016 it was manageable. The rapid growth of merchant/farmer held inventory in figure 8 demonstrates that the rate of surplus development accelerated in 2017. The 2023 efforts to reduce acreage slowed the growth of the surplus but did nothing to relieve it. Breweries reported holding fewer hops on March 1, 2024 than any year since the USDA began recording hop stocks in 1947^[28].

How many extra millions of pounds of hops (thousands of metric tons) are there in storage around the globe? It’s impossible to give an exact number with the information available today. I have a solution for this that I plan to work on after the 2024 harvest. Until then, there is no way to know.

According to the most recent export numbers available from Hop Growers of America, the U.S. exported 37.6 million pounds (17,055 mt) of hops between September 2022 and August 2023. During this time, the U.S. imported 10 million pounds (4,055 mt) from overseas^[29]. A large portion of those shipments occur between September and March to take advantage of cold winter temperatures in the northern hemisphere.

FUN FACT:

The U.S. hop export figure is consistent except for a spike of 1,713.4 mt (3.77 million pounds) reported in 2021 and another of 4,125.3 mt (9.09 million pounds) in 2022^[30]. The total of the two spikes was 12.87 million pounds (5,838.7 mt). In 2023, exports returned to normal. The timing of the export spikes coincided with the completion of the construction of the Yakima Chief Hops’™ (YCH) warehouse in Belgium. According to the company’s website, the warehouse holds 8,800 pallets of hops^[31]. In the YCH shipping guide, a pallet is shown to hold 600kg (1,320 pounds) of pelted hops. This is for a standard American-size pallet. A Euro pallet is smaller^[32] and can hold 400 kilos (880 pounds) of hop pellets. If the warehouse was filled with pelleted hops, it could hold 7.74 million pounds (3,510 mt) of hops. Pallets holding extracted hops, however, could represent 5-10 times as many raw hops depending on their packaging. It is safe to assume YCH sells alpha extract. Considering extract storage, the YCH Belgian warehouse could easily account for the entire 12.87-million-pound (5,838.7 mt) surge in hop exports in 2021-2022. That inventory would not need to be reported on USDA hop stocks figures since it is not located in the U.S.^[33]

At the 2023 Hop Growers of America convention, Alex Barth claimed the annual demand for U.S. hops was between 100-105 million pounds (45,359.7 – 47,627.7 mt). During on my doctoral research, I developed a way to measure the demand for hops and predict its effects on future pricing. Based on that, I believe Alex’s estimates were too high by 10-15 percent. The cumulative effect of this miscalculation between 2016 and 2022 would result in tens of millions of pounds of surplus hops. I discussed how large I thought it was in my November 2023 article, “What Hop Merchants Won't Tell You About the Surplus.”

A simplified view of the market suggests that demand for American hops has been closer to 85 million pounds (38,555.7 mt), not 100-105 million pounds (45,359.7 – 47,627.7 mt). If American farmers can reduce production by 10,000 acres in 2024, that will stop the buildup of inventory. The next task will be to reduce inventories. Cuts will be necessary in 2025 to create an opportunity for the mountain of aging hops still sitting in inventory to move into the market, unless those hops are destroyed. Extracting surplus high alpha aroma varieties fixes the problem for proprietary varieties, but it would destroy the alpha market for some time to come. I expect that will happen as the owners of proprietary varieties are desperate to restore order to their assets before their patents expire.

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GERMANY’S GROWING PROBLEMS

Germany has been Europe’s industrial powerhouse for decades. Those days may be coming to an end^[34]. In response to Covid, the U.S. government authorized up to $659 billion in loans to employers in 2020 and 2021 through the Paycheck Partnership Program (PPP)^[35][36]. This provided instant relief. Some American hop farms and merchants received millions of dollars under this program despite high forward contract rates ensured sales and farm workers essential worker status minimized their suffering^[37][38]. Loans favored big business and were later forgiven^[39][40].The Federal Reserve noted on their website that the funds were not well spent and did not perform as hoped^[41].

The European Union (EU) took a different approach. They created the Recovery and Resilience Facility (RRF). They approved €360 billion in loans and €312.5 billion in grants to be dispersed between 2021 and 2026^[42]. Rather than focusing on helping businesses survive the crisis, the EU focused on “building back better” following Covid^[43]. Because the way European hops are heavily contracted forward, the industry didn’t feel the effect of reduced beer consumption as much as breweries selling to bars and restaurants, which operated at reduced capacity. Halfway through the RRF program, €225 billion of the available €672.5 billion, has been spent^[44]. Many fear the potential for a financial crisis as the payments come to an end in 2026^[45].

The post-covid recovery in the EU was slow prior to the war in Ukraine^[46]. RRF funds have supported the economy^[47]. The war is now blamed for poor economy, which has brought high inflation^[48] (Figure 9) and greater demands on government funds.

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Figure 9.  Euro Area Annual Inflation Rate

Source: Eurostat^[49]

The EU sent €88 billion to support Ukraine between 2022 and 2024^[50]. Despite strong anti-war statements and anti-Russian sentiment by governments across the EU, Europeans rely on imports of Russian natural gas, grains and petroleum-based fertilizers more in 2024 than ever^[51][52][53].  

The war has strained European budgets in more ways than one. The United Nations Refugee Agency (UNHCR) estimates 5.98 million Ukrainian refugees have entered EU member states. Germany leads the way^[54][55]. Supporting refugees has created an additional financial strain on an already suffering Germany, once considered the industrial powerhouse of the EU^[56]. The new financial obligations combined with Germany’s ambition of “net zero budget” brings the country closer to recession and created tensions among farmers^[57][58][59].

In 2022, Biden pledged to end the Nord Stream 2 pipeline if Russia invaded Ukraine^[60]. Countries that have investigated the sabotage refuse to comment^[61][62]. Following the destruction of Nord Stream 2, the U.S. became the largest exporter of Liquid Natural Gas (LNG) to Europe increasing from 5% to 20% of imports^[63][64]. The evidence is circumstantial, but the U.S. appears to have had motive, means and opportunity.

As a result of the destruction of the Nord Stream 2, Russian sanctions and the closure of Germany’s nuclear power plants^[65], prices for energy and natural gas increased^[66]. Meanwhile, natural gas prices in the U.S. have remained stable (Figure 10).

Figure 10. EU & US natural gas prices

Source: U.S. Federal Reserve of St. Louis

Rising labor costs, high interest rates and bureaucracy have made Germany and the EU less competitive^[67][68]. The trifecta of negative economic circumstances does not bode well for European farmers whose costs are rising in a market where prices for some commodities, like hops and barley, are falling^[69]. The forecast for the future of the German economy is not optimistic^[70]. Farmers are feeling the pain as their profit margins are reduced to nothing. Some European hop farmers have already required intervention and special treatment by their hop merchants to survive. That trend will likely continue as the pain of a difficult economy makes its way to every corner of the union. The European people’s patience with their government is wearing thin. Nationalism is spreading across the continent^[71][72][73]. In former Soviet block countries there is tension between ethnic Russians and the native populations where none existed since the fall of communism. Farmers have been the first to reach the breaking point. The protests continue in European capitals as the time for field work approaches. I will write more on that story in a future edition of the MacKinnon Report.  

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^[1] https://www.usahops.org/img/blog_pdf/474.pdf

^[2] https://www.yakimaherald.com/news/local/hop-growers-make-changes-adjust-acreage-in-response-to-covid-19-pandemic/article_64c56709-9fca-513f-8b59-73095458b508.html

^[3] https://www.goodbeerhunting.com/sightlines/2020/5/15/covid-19-forces-hop-growers-to-confront-new-concerns-over-supply-safety

^[4] https://www.usahops.org/growers/plant-protection.html

^[5] https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023R1783

^[6] https://pubchem.ncbi.nlm.nih.gov/compound/Etoxazole

^[7]https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwiDmdnT6oWFAxVrOkQIHaTnA0AQFnoECA8QAw&url=https%3A%2F%2Fagrinfo.eu%2Fbook-of-reports%2Fmaximum-residue-levels-for-etoxazole%2Fpdf%2F%23%3A~%3Atext%3DThe%2520EU%2520has%2520reduced%2520the%2C)%2520of%25200.01%2520mg%252Fkg.&usg=AOvVaw2xCcpjnugeMun2ARhvIY2j&opi=89978449

^[8] https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32023R1029

^[9] Macar, O., Kalefetoğlu Macar, T., Çavuşoğlu, K. et al. Risk assessment of oxidative stress and multiple toxicity induced by Etoxazole. Sci Rep 12, 20453 (2022). https://doi.org/10.1038/s41598-022-24966-0

^[10] https://www.usahops.org/growers/plant-protection.html

^[11] https://www.ihgc.org/wp-content/uploads/IHGC_Statement_DG-SANTE_Bifenazate-MRL_2024.pdf

^[12] https://www.fda.gov/regulatory-information/search-fda-guidance-documents/guidance-industry-channels-trade-policy-commodities-residues-pesticide-chemicals-which-tolerances

^[13] https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/G/SPS/GEN1944.pdf&Open=True

^[14] https://eping.wto.org/en/TradeConcerns/details?imsId=448&domainId=SPS

^[15] https://food.ec.europa.eu/horizontal-topics/farm-fork-strategy_en

^[16] https://www.euspa.europa.eu/newsroom/news/can-we-halve-use-pesticides-eu-2030

^[17] https://www.bbc.com/news/world-europe-68218907

^[18] https://www.lemonde.fr/en/international/article/2024/03/15/european-commission-rolls-back-cap-s-green-measures_6621907_4.html

^[19] https://www.usahops.org/growers/plant-protection.html

^[20] According to USHIPPC, The UK, Hong Kong, China, Japan, Taiwan, Turkey and Vietnam all have 15ppm as their acceptable MRL. The U.S., Australia and Canada all have a 7ppm MRL.

^[21] https://www.just-drinks.com/news/beer-consumption-sluggish-in-eu-amid-macroeconomic-scars/

^[22] https://www.statista.com/statistics/270275/worldwide-beer-production/

^[23] https://www.ihgc.org/wp-content/uploads/IHGC_Statement_DG-SANTE_Bifenazate-MRL_2024.pdf

^[24]https://www.nass.usda.gov/Statistics_by_State/Regional_Office/Northwest/includes/Publications/Hops/2024/hops0324.pdf

^[25] To my knowledge, this is the first time the term hop velocity and this trend has been reported in writing. I considered publishing a journal article on the subject, as I believe it is worthy. Unfortunately, I don’t have the time. If somebody would like to publish such an article based on my research, I would be happy to participate as a co-author.

^[26] https://www.hoptalk.live/post/too-many-hops-10000-acre-cut-needed-says-barth

^[27] https://brewingindustryguide.com/rightsizing-the-hop-market/